Posted at 12:09 p.m., Friday, November 8, 2002
Safeway profit less than forecast
By Courtney Schlisserman
Shares of the No. 3 U.S. supermarket company fell as much as 8.6 percent.
Chief Executive Steve Burd in a statement said 2003 will be "a rebuilding year" and blamed the economic slowdown. "It is unclear when consumer confidence will strengthen," he said.
Safeway and larger competitors Albertson's Inc. and Kroger Co. have been reducing prices to compete with discount chains including Wal-Mart and warehouse clubs such as Costco. Safeway said its previous forecast for the next several years of 13 percent to 15 percent earnings growth is too high.
"There are two things going on: one is trading down within the store people buying cheaper products," said Igor Krutov, an analyst at Vontobel USA Inc., which has close to 800,000 shares. "Plus, there is the additional negative effect for the supermarkets of more customers willing to travel to discount stores."
Earnings for the quarter will be 78 cents to 80 cents a share. The average estimate of analysts surveyed by Thomson FirstCall was 82 cents.
Safeway expects to earn $2.50 to $2.65 a share next year, excluding one-time costs. The company was forecast to earn $2.92 next year, according to First Call.
Safeway said it will spend about $1.3 billion to $1.5 billion next year and open 50 to 55 new stores. The company has 1,793 in the U.S., including in Hawai'i, and Canada.