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Safeway sales up, profit down in 1Q
April 29th, 2010
PLEASANTON, Calif. – Safeway Inc. posted an uptick in revenue for its fiscal 2010 first quarter but saw earnings decline and fall short of Wall Street's forecast.
The supermarket chain said Thursday that total sales rose 1.1% to $9.3 billion in the 12 weeks ended March 27 from $9.2 billion a year earlier. The increase stemmed from a higher Canadian exchange rate and higher fuel sales, partly offset by a 3.1% decline in identical-store sales, excluding fuel, according to the company.
First-quarter net earnings came in at $96 million, or 25 cents per diluted share, compared with $144.2 million, or 34 cents per diluted share, in the prior-year period. The average estimate of financial analysts was for fiscal 2010 first-quarter earnings of 30 cents per share, according to Thomson Financial.
Gross profit, meanwhile, fell 31 basis points to 28.41% of sales in the 2010 first quarter, compared with 28.72% of sales a year ago. Excluding the 26-basis-point impact from fuel sales, gross profit declined 5 basis points. Safeway the decline was largely the result of increased advertising, partly offset by changes in product mix and improved shrink.
Net cash flow used by operating activities totaled $242 million in the first quarter, compared with $151 million in the year-ago period. The increase was primarily due to a greater decline in third-party gift card payables, net of receivables, in the first quarter of 2010 compared to the first quarter of 2009, according to the retailer. Excluding the effect of third-party gift cards, cash flow from operating activities improved to $134.3 million in the first quarter of 2010 from $66.1 million a year earlier.
"Our first quarter results were in line with our expectations, and we are reaffirming our earnings-per-share guidance for 2010 of $1.65 to $1.85," Safeway chairman and chief executive officer Steve Burd said in a statement.
"We are encouraged by our volume trends in the first quarter of 2010 compared to the fourth quarter of 2009," Burd explained, "and the trends have improved in the second quarter of 2010. We believe we will continue to see positive trends in the second half of the year as the economy improves, deflation subsides and consumer confidence builds."
For the year, Safeway is projecting identical-store sales growth (excluding fuel business) of 0% to 1%, an operating profit margin change of negative 10 to positive 5 basis points, cash capital expenditures of $900 million to $1 billion, and free cash flow of $900 million to $1.1 billion.
Safeway said first quarter capital expenditures totaled $192.6 million. The retailer completed nine Lifestyle store remodels and closed 13 stores. For the year, the company plans to open 20 new Lifestyle stores and complete 80 Lifestyle remodels. The chain operates 1,712 stores in the United States and Canada.