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Safeway Touts 'Stealth Pricing,' Q3 Volume Slides

PLEASANTON, Calif.Safeway here said Thursday its "Just for U" digital marketing platform gives it the ability to offer "stealth pricing" that falls below competitors' radar.

"We believe we can nullify the effect of competition because what we do will be mostly invisible to other retailers, giving us more flexibility on price than anyone we compete with and doing so on a more personalized basis," Steve Burd, chairman, president and chief executive officer, told analysts during a conference call to discuss third-quarter financial results.

He said consumers who use the online program will be able to save an additional 15% to 20% over the promotional prices other retailers offer, "and we think that will help us drive sales."

Safeway has been testing "Just for U" in Chicago, Northern California and Hawaii without much advertising or promotion, he said, "and we're seeing double-digit increases among the most loyal group of shoppers." The chain plans to add one more market to the marketing platform this year and roll it out chainwide by the second quarter of 2012.

Net income for the third quarter rose 6% to $130.2 million, while sales increased 7.1% to $10.1 billion and identical-store sales, excluding fuel, were up 1.5% — the seventh consecutive quarter of improved ID's, Burd noted. He said ID sales strengthened throughout the quarter, with ID's for the last six weeks of the third quarter and the first four-and-a-half weeks of the fourth quarter running "a tad below 2% positive."

For the year to date net income fell 16.4% to $301.3 million — primarily due to the negative impact from the Canadian dividend Safeway paid in the first half of the year, the company explained — while sales rose 6.3% to $30 million and ID sales, excluding fuel, rose approximately 0.8%.