PLEASANTON, Calif. — Safeway Inc. reported a 41% drop in net earnings for its second fiscal quarter as sales stalled. The company has revised its full-year earnings projection downward.

Safeway Inc. reported a 41% drop in net earnings for its second fiscal quarter as sales stalled. The company has revised its full-year earnings projection downward.

Safeway’s bottom line fell to $141.3 million from $238.6 million in the year-ago quarter. The 2009 results included a benefit of $57.8 million from the resolution of a tax matter.
Sales totaled $9.52 billion, essentially flat on a year-over-year basis. Higher fuel sales and a positive benefit from Canadian exchange rates were offset by a 2.5% decline in identical-store sales, excluding fuel.

"Our second quarter results were in line with our expectations, and we are encouraged by our volume trends in the quarter," said Steve Burd, chairman, president and chief executive officer. "However, deflation continues in price per item and is not expected to significantly improve until the fourth quarter. As a result, we have lowered our expectations for the balance of the year."

The company now expects identical-store nonfuel sales to decrease between 1% and 1.5%, with earnings reduced to $1.50 to $1.70 per diluted share, down from an earlier range of $1.65 to $1.85 per share.