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Wall Street Overlooks Safeway Success: Burd

PLEASANTON, Calif. — Safeway said the beating its stock experienced Wednesday — the same day it announced what one analyst called "decent" second-quarter results — could be due to the short-sightenedness of Wall Street.

Steve Burd"It’s always difficult to predict the market reaction," said Steve Burd, chairman and chief executive officer. "But I think when somebody else [in the industry] struggles, people say, ‘I guess everybody is struggling,’ and it never really occurs to them that others who might be having some level of success might actually be contributing to the struggles of others.”

Burd did not name any companies that are struggling, but the reference was apparently to Supervalu, which announced lowered expectations a week earlier.

For the quarter that ended June 16, Safeway's net income fell 15.8% to $122.7 million — the result, Burd said, of one-time costs associated with the chainwide rollout of its Just for U digital platform in the U.S., combined with added interest expense on borrowings of $1.8 billion to repurchase stock. Sales for the 12-week quarter rose 1.9% to $10.4 billion, and identical store sales were up 0.8%.

More Safeway news: Safeway Explains Stock Buybacks

For the first half, net income rose 14.4% to $195.6 million, while sales increased 2.1% to $20.4 billion.

Burd said results of the Just for U personalized pricing program are running ahead of the chain’s expectations, and even if competitors were to develop their own digital platforms, Safeway would have a lead of at least 18 months and would continue to tweak the program to improve it.

“What we’re doing is still in its infancy,” he said, “and if the current program is Just for U 2.0, we still have a 3.0 and a 4.0 in the planning stages. And while we believe other companies will follow us in developing more personalized shopping systems, it would require a minimum of 18 months for them to develop it, so we believe we have a substantial lead. And our system will be so much better in 18 months that it won’t matter who else is into personalizing their offers.”

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