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Acquisitions Help Safeway Profit Rise 21%

September 29, 2000|From Bloomberg News

Safeway Inc., the third-largest U.S. supermarket chain, on Thursday said fiscal third-quarter profit rose 21% as acquisitions helped it boost sales and cut costs.

Net income rose to $270 million, or 53 cents a share, in the quarter ended Sept. 9 from $223.4 million, or 44 cents, a year earlier, Safeway said. Sales rose 15% to $7.46 billion from $6.48 billion.

Shares of Pleasanton-based Safeway fell $4.75 to close at $49.38 on the New York Stock Exchange after the company cut its forecast for fourth-quarter identical-store sales and failed to meet some analysts' estimates for sales this quarter.

The stock was up 51% this year and hit a 52-week high of $54.44 on Tuesday. Investors are used to the company beating estimates, said Neil Currie, a UBS Warburg analyst.

Safeway has been able to cut costs and negotiate lower prices from suppliers after acquisitions that included Randall's Food Markets Inc. and Carr Gottstein Foods Cos. The company also increased the number of products sold under its private labels, which generate more profit than national brands.

Per-share earnings were in line with the 52-cent average estimate of analysts surveyed by First Call / Thomson Financial.

Identical store sales, which exclude replacement stores, rose 4.2%, less than the 5% to 6% estimate of some analysts. Safeway operates 1,680 stores in the U.S. and Canada.

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Kaufman & Broad Home Corp., California's largest home builder, said fiscal third-quarter earnings rose 17% as cost-cutting measures offset lower home sales and revenue.

The Los Angeles-based company's net income for the quarter ended Aug. 31 rose to $44.6 million, or $1.14 a share, from $38.2 million, or 78 cents, in the year-earlier period. Results for the year-earlier quarter included an $18.2-million charge related to its mortgage banking operations.

Revenue fell 7% to $981 million, from $1.06 billion, as the company sold 5,710 homes, down from 6,103. Kaufman & Broad cited the completion of two California communities that weren't replaced by new developments, and a drop in housing starts in France after a home-building tax credit program ended, for the decline.

The results exceeded Wall Street's estimates of $1.08 a share, according to a First Call / Thomson Financial survey. Shares fell 44 cents to close at $26.88 on the NYSE.

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