Safeway Says Inflation Moderating as 3Q Sales and Earnings Rise

ELLIOT ZWIEBACH

PLEASANTON, Calif. — Safeway here said yesterday the rate of inflation showed signs of moderating somewhat in the third quarter and is likely to continue to slow down in 2008. Whereas Safeway absorbed a 2-cent hit on earnings per share due to inflation earlier in the year, the impact on third-quarter earnings was zero as it passed through inflationary cost increases, Steve Burd, chairman, president and chief executive officer, told analysts during a conference call to discuss financial results. Net income for the quarter, which ended Sept. 8, rose 13% to $194.6 million, with sales climbing 3.9% to $9.8 billion and comparable-store sales, excluding fuel, up 3.2%. For the 36-week period net income rose 4.4% to $587.2 million, with sales up 4.5% to $28.9 billion. “Inflation in the third quarter was essentially the same as in the second quarter, which was very high,” Burd said, “and we expect to see a fair amount of inflation in the fourth quarter." Safeway experienced “a three-week speed bump” early in the third quarter “when we wondered if there was a shift in economic activity taking place,” he said, “but the last four weeks of the quarter were among the strongest weeks of the year, and by the early part of the fourth quarter things had normalized. We’re seeing some prices moderate in produce, but inflation continues to be very high in dairy, with beef and chicken up but less dramatically than in dairy,” Burd said.

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