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A non-cash good will impairment charge resulted in a drop in sales and profits for Safeway Inc.’s 2009 fourth quarter, while the Pleasanton, Calif.-based chain saw its highest quarterly free cash flow during the same period.
“Excluding the non-cash good will impairment charge, our results were in line with our expectations,” said Steve Burd, chairman, president, and CEO. “Despite very challenging economic conditions, Safeway generated free cash flow of $1.5 billion in 2009. This exceeded our expectations and is the highest annual free cash flow ever achieved by Safeway.”
Total sales declined 8.1 percent to $12.7 billion in the fourth quarter of 2009, compared with $13.8 billion in 2008. According to Safeway, this decline was the result of an additional week in 2008 and a 4.1 percent decline in identical-store sales, excluding fuel, for the quarter.
Safeway also saw a net loss of $1.6 billion ($4.06 per share) for the 16-week fourth quarter. Excluding the impairment charge of $1.8 billion, net income would have been $209.1 million (53 cents per share). Net income was $338 million (79 cents per share) for the 17-week fourth quarter of 2008.
In the fourth quarter of 2009, Safeway recorded a non-cash good will impairment charge of $1.8 billion, due mainly to its reduced market capitalization and a weak economy. The divisions affected were primarily Vons and Eastern, and the good will originated from previous acquisitions.
Safeway’s net loss for 2009 was $1.09 billion ($2.66 per share). Excluding the goodwill impairment charge, net income for the year would have been $720.7 million ($1.74 per share). This compares to net income of $965.3 million ($2.21 per share) in the 53-week year 2008.
The grocer invested $248.8 million in capital expenditures in the fourth quarter of 2009. Safeway opened one new Lifestyle store, completed 20 Lifestyle remodels and closed six stores. For the year, the company invested $851.6 million in capital expenditures, opened eight new Lifestyle stores, completed 82 Lifestyle remodels and closed 22 stores. At year-end 2009, 79 percent of its stores were Lifestyle stores.
In other news, Safeway said that all of its Colorado bargaining units represented by the United Food and Commercial Workers have ratified a new contract following a two-week voting period that ended Tuesday.
Safeway operates 1,725 stores in the United States and Canada.