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Just for U Could End Print Ads: Safeway

PLEASANTON, Calif. — Safeway here said Thursday the success of its Just for U digital program may enable it to discontinue print ads in the U.S. by the end of the year.

In a conference call with analysts to discuss financial results for the year and fourth quarter that ended Dec. 29, Steve Burd, chairman and chief executive officer, also said the chain’s health and wellness initiative, whose launch was scheduled for last year’s fourth quarter, should be ready to go by mid-year. Responding to a question about whether Safeway would consider selling its Canadian operation, he said the chain will do “the sensible thing.”

Asked when the Just for U program might allow the chain to pull back on promotional spending, Burd said, “We could get there probably late in 2013 — and as people become more digital, we see it as an opportunity get out of newspaper ads and personalize the ads for every household,” he said.

According to Burd, Safeway has registered 5.4 million U.S. households in its Just for U program, or 45% of its sales base — a number that could reach 55% by year’s end and ultimately reach a maximum level of 65%, he noted. Just for U is scheduled to be introduced in Safeway’s Canadian division by mid-year, he added.

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He said Just for U helped Safeway increase unit volume in the U.S. by 0.3% during the fourth quarter — at a time the supermarket channel declined 2.1% and all retail outlets fell 0.6% — with its U.S. market share growing 38 basis points in the supermarket channel and 10 basis points across all outlets.

For the 16-week quarter, net income rose 13.1% to $244 million, while sales increased 1.3% to $13.8 billion and identical-store sales, excluding fuel, were up 0.8%. For the year net income climbed 15.4% to $596.5 million, with sales rising 1.3% to $44.2 billion and IDs, excluding fuel, up 0.5%.

Results included the sale or closure of Genuardi’s stores, which lowered net income by $9.6 million for the quarter and $31.9 million for the year; plus the benefits of legal settlements. Excluding fuel, gross margins fell 20 basis points during the quarter, compared with a drop of 55 basis points in the prior quarter.

John Heinbockel, managing director for Guggenheim Securities, New York, said comps improved “courtesy of the Just for U maturation” and predicted that ongoing maturation and a sequential benefit from inflation could enable comps to accelerate “to 2% or so” in the second half of the year.

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