Safeway Misses Analyst Estimate As Earnings Tumble

For the first quarter, Safeway, Inc. posted a net loss from continuing operations of $83.1 million, or 36 cents per diluted share, versus net income from continuing operations of $59.7 million, or 25 cents per diluted share, for the first quarter of 2014. Excluding unusual items in the 2014 and 2013 first quarters, income from continuing operations, net of tax, was $12.8 million, or six cents per diluted share, versus to $37.5 million, or 16 cents per diluted share, in last year’s first quarter.

Analysts polled by Thomson Reuters expected, on average, for Safeway to post 18 cents per diluted share in adjusted income from continuing operations for the quarter.

Safeway identical-store sales, excluding fuel, increase by 1.8% with a 1% increase in price per item and a 0.8% increase in volume. Sales and other revenue gained 1% to $8.3 billion versus the first quarter of 2013

The unadjusted negative bottom-line result in the first quarter included a loss on foreign currency translation of $93.4 million after tax benefits and merger-related expenses of $2.5 million after tax benefits. Before adjustment, the first quarter of 2013 benefited from a $17.2 million reduction on corporate-owned life insurance income tax expense and a $5 million reduction of tax expense due to the resolution of federal income tax matters.

On March 6, 2014, Safeway and Albertsons LLC announced a definitive merger agreement that set out terms for AB Acquisition LLC to acquire all outstanding shares of Safeway.

“We are working diligently to close the merger with Albertsons by the fourth quarter,” said Robert Edwards, Safeway president and CEO. “While sales met plan in the first quarter, income was slightly below plan, in part as a result of inflation in produce, meat and pharmacy that was not fully passed along for competitive reasons. In the second quarter of 2014, identical-stores sales are currently running well above 2%, and we expect to pass along most of the inflation we are experiencing. In addition, the direct and indirect cost initiatives we are implementing are expected to improve profitability in the second half of 2014. We continue to drive sales momentum through our center of store remodels, as well as merchandising premium, Hispanic and Asian products to meet local demographic needs. In addition, our sales of organic and natural products continue to grow at a rapid pace, with our private label brands O Organics and Open Nature growing approximately two times faster than the rest of the market.”