PLEASANTON, Calif. — Safeway here said Thursday that an unanticipated spike in deflation is offsetting sales-volume improvements.
In a conference call with analysts discussing second-quarter results, the company said sales gains in the second quarter and first half, which ended June 19, were basically flat, driven primarily by a more favorable Canadian exchange rate and higher fuel prices but offset by a 2.5% decline in identical-store sales and a deflation rate of 2.4%.
“Volume improvements are not uniform across all geographies but they are universal, with all divisions showing improvements since the fourth quarter. In fact, six of the 10 divisions have improved more than 200 basis points, with some over 300 basis points,” said Steve Burd, chairman, president and chief executive officer.
Net income for the second quarter fell 40.8% to $141.3 million while sales were up 0.6% to $9.5 billion. For the half, net income dropped 38% to $237.3 million and sales rose 0.8% to $18.9 billion.
Safeway lowered its guidance for the year, forecasting earnings in the range of $1.50 to $1.70 per share — compared with prior guidance of $1.65 to $1.85 per share — and identical-store sales between -1% and -1.5%, compared with earlier predictions of 0% to 1% gains.