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Safeway Eyes Non-Core Businesses

PLEASANTON, Calif. — Safeway said last week it is optimistic that adding non-core businesses will enable it to grow operating income over the next three years.

“Our core business is a relatively low-growth business, particularly in this economic environment,” Steve Burd, chairman, president and chief executive officer, said. “But we’ve seen extraordinary growth in the Blackhawk gift card business, as well as in the property development center business we started in 2008, and we contemplate creating a significant wellness program that will add to operating income.”

Burd made his remarks to analysts during a conference call to discuss financial results for Safeway’s fourth quarter and fiscal year that ended Dec. 31.

For the 16-week quarter, net income fell 6.1% to $215.6 million, while sales increased 6.2% to $13.6 billion and identical-store sales, excluding fuel, rose 1.5%. For the year, net income fell 12.4% to $516.7 million, with sales rising 6.3% to $43.6 billion and ID sales, excluding fuel, up 1%.

Burd said ID sales benefited from New Year’s Eve sales on the last day of the quarter, “but we’ll be hurt by the same amount in the first quarter of this year.”

He said he expects ID sales for the first quarter to drop approximately 70 basis points because of weather patterns, high inflation and fuel prices and the inclusion of New Year’s Eve in the fourth quarter. Offsetting those declines, he added, will be the chain’s stronger fuel loyalty program and the chainwide rollout of its “Just for U” digital marketing platform.

“We believe ID sales for this year will be much stronger than in 2011 because of the fuel loyalty program, which we have strengthened in the last few weeks, and the ‘Just for U’ rollout,” he added.

Safeway introduced the program in its Vons chain in Southern California earlier this year, “with a very soft rollout” and a few new elements, Burd noted.

He said the program resulted in fourth-quarter sales gains of more than 50 basis points in one of the two existing markets and “a little less but a still meaningful amount” in the other.

During the quarter traffic and ticket were up but transactions were down, Burd said.

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