PLEASANTON, Calif. — Safeway's stock fell more than 9% Thursday after the retailer posted a 0.5% gain in second-quarter sales, excluding gas, and a decline in gross margins.
For the 12-week quarter, net income rose 3.2% to $145.8 million — due primarily to efforts to reduce costs, the company said — while sales increased 7.1% to $10.2 billion, due primarily to higher fuel sales and improved Canadian exchange rates. Gross margins were 27% of sales, vs. 28.55% in the year-ago period.
The company said its market share has eroded slightly for the last few quarters, but said it hoped to reverse that trend through the rollout of its Just for U targeted marketing campaign.
"We just need to get our marketing program into more markets, and we'll be fine," Steve Burd, chairman, president and chief executive officer, said during a conference call with analysts.
For the half net income fell 29% to $171 million due to a first-quarter tax expense of $80.2 million related to the repatriation of earnings from Canada, excluding which sales would have been up 5.9% to $251.2 million — while sales rose 6% to $20 billion. Same-store sales were also up 0.5% for the half-year period.
