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Safeway's Burd Sees Gains by Year-End

PLEASANTON, Calif. — Any investors who are skeptical of Safeway’s chances of gaining market share won’t have to wait long to see if their assumptions are correct, Steve Burd, chairman and chief executive officer, told analysts Thursday.


“At the end of the day, it's about whether or not the operating profits of this company are going to stabilize and grow and whether or not identical-store sales are going to begin to turn positive and we will gain market share. We believe those things will happen, and that’s why we buy our stock.

"The good thing about all this, for those of you who are skeptical, is you do not have to wait very long to find out if you’re right.  This all takes place in the third and four quarters.”

Related story: Burd’s Role at Safeway Evolves

Although ID sales, excluding fuel, were flat in the first quarter, which ended March 24, Burd said they are up 1% during the last eight weeks, and he contemplates an increase to about 3% by the end of the year as a result of the chain’s marketing initiatives.

In response to a question about industry speculation, Burd said the combination of recent actions by Safeway — including Robert Edwards’ promotion to president, a change in governance rules, a more aggressive stock buyback effort and the breakout of Blackhawk results — does not foreshadow any significant event in the chain’s future.  “It’s just natural behavior,” he explained. 

For the 12-week quarter, net income rose 190% to $72.9 million, due to the impact a year ago of the decision to repatriate $1.1 billion from the company’s Canadian subsidiary; excluding that impact, net income would have been down 30.8% from $105.3 million a year ago.

Burd said first-quarter earnings were negatively impacted by the inclusion of New Year’s Day, which fell on a Sunday this year, plus unusual weather patterns and high gasoline prices.  “Operating profit in the quarter would have been essentially the same as last year without the holiday shift,” he noted.

Sales for the quarter rose 2.4% to $10 billion, which the company attributed to higher fuel sales, higher revenue from Blackhawk and additional sales from new stores.

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