PLEASANTON, Calif. — Safeway last week said higher fuel prices fueled sales and earnings during the first quarter, although net income was hit by some one-time charges.
“When fuel prices go up, we have the cheapest price compared with branded companies,” Steve Burd, chairman, president and chief executive officer, told analysts during a conference call. “And when you add in promotional programs that reduce the price per gallon, it all works to our advantage.”
For the quarter, net income fell 74% to $25.1 million as the result of a tax charge of $80.2 million related to the previously announced decision to repatriate $1.1 billion from the company's wholly owned Canadian subsidiary. Excluding the charge, adjusted net income was up 9.7% to $105.3 million.
Sales for the quarter increased 4.8% to $9.8 billion, and identical-store sales, excluding fuel, rose 0.4% — the fifth consecutive quarter of ID sales growth and the first positive numbers in eight quarters, Burd pointed out.
Safeway said the overall sales increase resulted from a combination of higher fuel sales, an increase in the Canadian exchange rate, higher non-fuel-related IDs (up 120 basis points, Burd noted) and a change in the way the chain accounts for its Blackhawk gift-card subsidiary.
Burd acknowledged that volumes improved during the quarter but were still negative. “They were better than in the fourth quarter,” he explained, “following one or two quarters in which volume was flat.”
Sales were up in nine of the chain's 10 operating divisions, he said, noting that were it were not for extraordinary snowfall, “all 10 would have shown improvement over the fourth quarter.”
“We're getting everyday prices down to reasonable levels and shelf-to-shelf prices that are even with our primary competition and lower than our secondary competition,” he said.
Burd also said Safeway's “Just for U” online program — which offers shoppers personalized pricing based on their shopping history, in test in Chicago and Northern California — is being used more by loyal customers than by occasional shoppers. However, the company has introduced a feature in one sub-market, which he did not identify, that's designed to attract occasional shoppers, “and in that market the occasional shoppers are using it more than the most loyal shoppers, and we plan to incorporate that as we roll that program out more broadly.”
