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Despite soft sales results, Safeway pushes on

BY Michael Johnsen

PLEASANTON, Calif. This year’s flu season has already benefited pharmacy retailers, suggested Safeway president and CEO Steve Burd during a conference call with analysts Thursday morning.

“The regular flu vaccinations are up considerably for us this year,” he said, and that means an increase of foot traffic of customers who may not be loyal Safeway shoppers. “We see that as an opportunity to capture some business.”

While a strong influenza season appears to be a positive force, at least at the beginning of the season, deflation has significantly impacted the West Coast grocer this quarter.

“Safeway’s sales remained soft, driven largely by deflation in dairy, produce and meat, and a sluggish economy,” Burd stated. “However, we are encouraged that our household and transaction counts increased in the quarter, and that volume trends continue to improve. In addition, our year-to-date free cash flow of $865 million is up $366 million, or 73%, over last year.”

Despite those pressures, Safeway remains committed to its capital investment program this year. safeway invested $157.2 million in capital expenditures in the third quarter 2009, opening five Lifestyle stores, completing 16 Lifestyle remodels and closing 10 stores. During the first 36 weeks of 2009, Safeway invested $602.8 million in capital expenditures, with seven new Lifestyle stores, 62 Lifestyle remodels and 16 store closures. For the year, the company expects to spend approximately $1 billion in capital expenditures, open about 10 new Lifestyle stores and complete approximately 85 Lifestyle remodels.

The new and remodeled Lifestyle stores are helping to build the Safeway brand, Burd noted though a homogenous look and feel across the company, “which we’ve never had in this company.”

And Safeway’s smaller footprint model may garner greater attention going forward, Burd said. “We did open our second small vehicle format,” he said, and Safeway is currently ascertaining whether or not the smaller footprint may be an optimal growth vehicle in the future.

Safeway reported net income of $128.8 million ($0.31 per diluted share) for the third quarter 2009, compared with net income of $199.7 million ($0.46 per diluted share) for the third quarter 2008.

“In this difficult economy, we are working diligently to lower costs and meet the needs of our customers with high quality products, lower everyday prices and attractive club card specials,” added Burd.

Total sales declined 7% to $9.5 billion in the third quarter 2009.

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Costco reports drop in Q4, fiscal-year earnings

BY Alaric DeArment

ISSAQUAH, Wash. A combination of the recession and foreign exchange rates have hit mass merchandiser Costco hard over the past year.

The Issaquah, Wash.-based mass merchandiser reported net sales of $21.89 billion during the 16-week period ended Aug. 30, a 3% decrease from $22.63 billion in net sales that the company had in fourth quarter 2008. Net sales for fiscal year 2009 were $69.89 billion, a 2% decrease from $70.98 billion in fiscal year 2008. Nevertheless, the five-week period ending Oct. 4 saw net sales of $6.85 billion, an increase over the $6.67 billion during the same five-week period last year.

Net income during the fourth quarter was $374 million, compared with $398 million in fourth quarter 2008. Net income for the entire fiscal year was $1.09 billion, compared with $1.28 billion in fiscal year 2008.

“Fiscal 2009 results, including those of the fourth quarter, were negatively impacted by these previously reported factors: ongoing softness in U.S. sales, primarily the result of a weak economic environment; higher employee benefit costs, mainly consisting of higher healthcare eligibility and usage; and lower U.S. dollar amounts of international profits as a result of weaker foreign currencies,” Costco CFO Richard Galanti said in a statement.

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‘Fright Aid’ coupons help shoppers save

BY Allison Cerra

CAMP HILL, Pa. To help customers get their spook on for less this year, Rite Aid is offering in-store “Fright Aid” coupons worth more than $30 off select merchandise including Halloween and fall seasonal goodies.

Smart shoppers can also use their Halloween receipts dated Oct. 17 or earlier to earn additional savings of $5, $10 and $20 gift certificates through Rite Aid’s Rake in the Savings program. Details are available at www.riteaid.com.

“We know many Americans are a bit spooked this year by all the gloomy economic news,” said Bryan Shirtliff, SVP category management at Rite Aid. “But we also know that Halloween is a fun time for many to bury their worries and dress up as someone – or something – else.”

In the past, Saturday holidays such as this year’s have meant increased interest in attending or hosting Halloween parties, Shirtliff adds. The National Retail Federation predicts the average Halloween shopper will spend $56.31 with total holiday spending reaching $4.75 billion.

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