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Safeway Posts 84% Profit Rise, Lifts Outlook

July 21, 2006|From the Associated Press

Vons parent Safeway Inc. beat analysts' earnings expectations for the second quarter and raised its outlook for the remainder of the year, providing the strongest indication yet that the nation's third-largest grocer has finally recovered from years of labor strife and sales erosion.

The Pleasanton, Calif.-based company said Thursday that it made $246.2 million, or 55 cents a share, in the three months ended June 17. That represented an 84% increase from net income of $134 million, or 30 cents, at the same time last year.

This quarter's results included a $58.5-million lift from interest earned on a previously announced income tax refund.

Without that one-time boost, Safeway said it would have earned 42 cents a share -- a figure that topped the average estimate of 36 cents of analysts polled by Thomson Financial.

Safeway also outstripped analysts' sales projections. It racked up $9.37 billion in sales for the period, a 6% increase from last year. The average analysts' estimate had been $9.26 billion.

Bolstered by the strong quarter, Safeway predicted it would earn 10 cents a share more than management had anticipated. Excluding gains from the income tax refund, Safeway now foresees annual earnings of $1.65 to $1.75 a share.

Virtually all the upside will occur in the final quarter, Safeway Chairman Steve Burd said.

Safeway shares rose $2.25, or 8.8%, to $27.92 -- a new high for the last year. The stock's 52-week low is $21.67.

The performance marked Safeway's strongest showing since it fell into a deep sales funk that began in 2001 as discounters such as Wal-Mart Stores Inc. and Costco Wholesale Corp. ramped up their efforts to sell less expensive groceries.

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