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SAFEWAY'S OPERATING NET RISES ABOVE EXPECTATIONS

OAKLAND, Calif. -- Safeway here reported operating earnings of $58.9 million in its second quarter ended June 18, an increase of 63.6% and far above Wall Street's expectations.Net income in the 12-week period -- including a $7.4 million charge related to early-debt retirement -- increased 43.1% to $51.5 million. The consensus estimate among securities analysts who follow Safeway was for operating

OAKLAND, Calif. -- Safeway here reported operating earnings of $58.9 million in its second quarter ended June 18, an increase of 63.6% and far above Wall Street's expectations.

Net income in the 12-week period -- including a $7.4 million charge related to early-debt retirement -- increased 43.1% to $51.5 million. The consensus estimate among securities analysts who follow Safeway was for operating earnings of about 39 cents per share, well below the 48-cents per share Safeway achieved before extraordinary items.

"They knocked the cover off the ball," said Jonathan Ziegler, a securities analyst at Salomon Bros., New York, who had estimated earnings of 38 cents per share in the quarter.

"A good chunk of it was still improvement going on up in Western Canada because last year at this time they were still going through a price reduction program [there]," he said. Another key to the quarter, Ziegler said, was that Safeway improved its gross-margin rate by 40 basis points to 27.4% of sales.

Gary Giblen, a securities analyst at PaineWebber, New York, said it was "a blowout quarter" for Safeway. He had estimated operating earnings at 40 cents per share.

"Every aspect of that performance is completely sustainable going forward," Giblen said. "There were no one-time type items."

In the quarter, Safeway trimmed operating and administrative expenses by 30 basis points to 23.31% of sales. This marked the fifth consecutive quarter the chain has lowered its expense ratio on a comparable quarter-to-quarter basis.

Sales rose 1.8% to $3.61 billion in the quarter and same-store sales increased 4.2%.

Burd of Safeway said the 4.2% same-store sales increase was "especially encouraging because it was accomplished on top of a 1.4% increase during the second quarter of 1993." Still, Burd said this level of same-store sales increase will "become more challenging" to duplicate for the balance of the year because of strong increases in the latter half of 1993.

Safeway, according to securities analysts, achieved same-store sales increases in each of its nine divisions.

2ND-QUARTER RESULTS

Qtr. Ended 6/18/94 6/19/93

Sales $3.61 billion $3.55 billion

Change +1.8%

Same-store +4/2%

Net Income $51.5 million $36 million

Change +43.1%

Net Inc/Share 42 cents 30 cents

24 Weeks 1994 1993

Sales $7.1 billion $6.95 billion

Change +2.2%

Same-store +4.2%

Net Income $93.4 million $34.3 million

Change +172%

Net Inc/Share 77 cents 29 cents

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