OAKLAND, Calif. -- Safeway here said it plans to boost capital spending for new stores and remodels to $550 million in 1996, an increase of nearly 16% over the $475 million it intends to spend this year. The upgraded capital spending budget was disclosed in conjunction with the chain's financial results for the third quarter and 36 weeks ended Sept. 9, which showed increased sales and earnings.
The company said it has spent $279 million through the first three quarters of the year to open 16 new stores and complete an unspecified number of remodels; it also said it intends to spend another $196 million during the fourth quarter to open 14 more new stores and complete additional remodels. Safeway officials said the chain expects to complete more than 100 remodels by year's end, but it does not release the number of remodels by quarter. "Strong operating results have enabled us to accelerate spending for new and remodeled stores," said Steven Burd, president and chief executive officer.
Net income for the 12-week quarter rose 37.2% to $83.7 million and 38.9% for the year-to-date to $214.4 million. The company noted that last year's third quarter included an extraordinary loss of $2.7 million for early retirement of debt. Sales rose 5.9% for the quarter to $3.8 billion and 4.6% for the year-to-date to $11.2 billion. Same-store sales were up 5.3% for the quarter -- the ninth consecutive quarter that same-store gains have exceeded 3%, the company noted -- and 4.6% for the 36 weeks. Ed Comeau, a securities analyst with Donaldson Lufkin & Jenrette, New York, attributed the increases to "the chain's ability to be more effective in promoting and marketing on a store-by-store basis and doing a better job of front-end service, providing better in-stock conditions and paying more attention to cleanliness at store level." Comeau also said the 1,057-store company is doing better in all divisions, with its strongest results in the Pacific Northwest, Denver and Arizona. Safeway's earnings from unconsolidated affiliate Vons Cos., Arcadia, Calif., rose to $4.8 million for the quarter from $1.3 million a year ago and $12.2 million for the 36 weeks from $10.4 million.
Earnings from Mexico-based Casa Ley, its other unconsolidated affiliate, improved to $4.6 million for the quarter from $3.1 million, but fell to $5 million for the year-to-date from $12.4 million.
