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Safeway feels impact of generics

BY DSN STAFF

PLEASANTON, Calif. —Safeway reported another strong quarter, but lower same-store sales were attributed in part to pharmacy sales. The chain also confirmed it would start testing a smaller-store format in the first half of the year.

The 1,743-store supermarket chain reported $301.1 million in earnings for its fourth quarter ended Dec. 29, with same-store sales increasing 4.4 percent, but only 2.8 percent when gas sales were excluded. For the full year, Safeway generated a 15.7 percent increase in profits of $888 million and a 5.2 percent jump in total sales of $42.3 billion.

In a Feb. 21 earnings call with analysts, Safeway chief executive officer Steve Burd said pharmacy sales had an impact on sales that were positive but on the low end of expectations.

“Same-store sales were negatively impacted by an unprecedented switch over from branded to generic drugs,” said Burd. “And if you look at the other drug store chains, you’ve seen the same thing happening.”

Burd also confirmed that Safeway is preparing to test a smaller store format to combat the arrival of Tesco in its home state of California. “It’s going to be an experiment and, traditionally, we like to keep experiments close to the vest,” Burd said. “So we’re not releasing any information about the concept except to say we should have something out of the ground in the first half of the year.” Safeway is expected to open the first stores somewhere in Northern California.

Safeway also continued to expand in 2007 and rolled out more stores and remodels. For the full year, it opened 20 new stores and remodeled 253 to its new Lifestyle format. “At the end of the fourth quarter, we had 57 percent of store base converted to our Lifestyle format, and that percentage is higher now with the stores we’ve remodeled this year,” Burd said.

The chain is forecasting that same-store sales will increase 3 percent to 3.2 percent in 2008 and plans to remodel 250 stores despite challenges in the economy and inflation that kicked in during the fourth quarter. “We are seeing a cautious consumer and just about everyone is forecasting a recession,” Burd said. “But we see no reason to change our earnings guidance for the year.”

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Sturken to celebrate his fifth year at Spartan by ringing NASDAQ bell

BY Michael Johnsen

GRAND RAPIDS, Mich. Spartan Stores’ chairman and chief executive officer Craig Sturken is slated to ring the NASDAQ opening bell on March 3 in celebration of his fifth anniversary leading Spartan, the company announced Thursday.

 “It is an honor to ring the opening NASDAQ bell in celebration of our fifth successful year since transforming into a consumer-centric organization and refocusing our business on our core distribution and retail operations,” Sturken stated. “We have been in the grocery business for more than 90 years and this is our eighth year as a public company, which is marked by our ability to develop and execute successful business strategies in a highly competitive market.”

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Unilever to reorganize company structure

BY Antoinette Alexander

LONDON Unilever, whose brands include Axe, Sunsilk and Dove, has announced that it is restructuring the company and combining its home and personal care segment and food segment into a single category structure.

Ralph Kugler, president of home and personal care, will step down in May at the Annual General Meetings after 29 years of service. The roles of president of home and personal care and president of foods will be merged under the leadership of Vindi Banga, currently president of foods.

To reflect the company’s focus on growth in developing markets, Central and Eastern Europe will be managed within an enlarged region comprised of Asia, Africa and Central and Eastern Europe. Western Europe will become a standalone region.

In other moves, Kees van der Graaf will retire in May from the Unilever board and from his role as president of Europe after a 32-year career with Unilever.

Harish Manwani, currently president of Asia/Africa, will lead the new expanded region. Doug Baillie will serve as president of Western Europe, having previously served as chief executive officer of Hindustan Unilever.

“These measures build naturally on the changes of recent years and give us an organizational structure even better placed to advance our growth agenda. At the same time, I want to express my deep appreciation to Kees and Ralph for the significant contribution they have made over long and distinguished years,” stated Patrick Cescau, group chief executive.

In addition, James Lawrence, currently chief financial officer, will be proposed in May for election as an executive director of Unilever. This change will mean that the Unilever board will be comprised of two executive directors and 11 non-executives.

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