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Safeway Mum on Further Divestitures

Safeway Mum on Further Divestitures

PLEASANTON, Calif. — Safeway here said last week it considers potential divestitures and other options for its U.S. holdings “from time to time” as part of its ongoing commitment to increase shareholder value, though the company had “nothing to announce” last week, Robert Edwards, the chain’s new president and chief executive officer, told investors.

Safeway CEO Bob Edwards
Robert Edwards

In his first quarterly call with analysts after succeeding Steve Burd in June, Edwards said the company had spent the last few months responding to an offer by Sobeys to buy Safeway’s 213-store Canadian operations — a transaction announced in June and expected to close during the fourth quarter.

In response to analysts’ questions about the balance of Safeway’s portfolio, Edwards said he had nothing to talk about.

Safeway agreed to sell its Canadian assets for a cash price of $5.8 billion (Canadian), which will result in an after-tax price of $4 billion (Canadian), of which $2 billion (U.S.) will be used to pay down debt, Edwards said.

Effective in the second quarter ended June 15, Safeway Canada has been classified as a discontinued operation.


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For the 12-week quarter, income from continuing operations rose 22.1% to $38.1 million, while sales and other revenues declined 1.6% to $8.7 billion — due primarily to lower fuel sales this year and the disposition of Genuardi’s in 2012, the company noted — and identical-store sales, excluding fuel, rose 1.2%.

The company said second-quarter income included increased legal reserves of $17 million related to “multiple matters,” an expense of $5.7 million triggered by its initial public offering of Blackhawk, and a gain of $8.5 million from the sale of investments.

For the half, income from continuing operations rose 45.2% to $113 million, while sales and other revenue fell 0.8% to $17.2 billion. ID sales, excluding fuel, were up 1.5%.

Read more: Safeway Cashes Out of Canada

The company said it expects ID sales for the fiscal year to fall between 1.5% and 2%, compared with 0.6% in 2012. Through the first few weeks of the third quarter they are running at about 1.5%, Edwards noted.

Safeway also said it expects earnings per share to fall in the range of $1.02 to $1.12, compared with 99 cents in 2012.

Edwards said Safeway expects inflation of 1% to 2% for the second half — “less than we had originally anticipated,” he noted.

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