Safeway Says Initiatives Will Sustain Earnings Growth

SAN FRANCISCO - Safeway believes it can sustain earnings growth of 12% to 15% over the next few years through a combination of ongoing lifestyle store development, the possibility of developing new formats, making acquisitions in new markets and growing its third-party gift card marketing business, Steve Burd, chairman, president and chief executive officer of the Pleasanton, Calif.-based chain, said here yesterday at the company's annual investors conference. "You might ask how one of our competitors could say he expects to grow earnings at 8% and we say we're going to grow at 12 to 15%. Part of the difference is Blackhawk Network." Blackhawk is a company Safeway developed in 2001 to create marketing initiatives, one of which currently involves offering third-party gift cards to supermarkets and other outlets around the country. "If Blackhawk's business grows at the 80% level we expect, then supermarket growth could be anemic -- around 5% -- and we'd still hit a 12% growth rate," Burd said. In other remarks, Burd said Safeway's lifestyle stores, which account for 43% of the chain's locations, are operating with six different formats: the standard model, three lifestyle-plus gradations, and two lifestyle "light" versions that feature fewer elements than the standard model. Robert Edwards, executive vice president and chief financial officer, said Safeway will maintain capital spending levels at about 3.4% of sales, or approximately $1.7 billion next year and through 2009, when it expects to complete its lifestyle remodels, after which it will reduce spending to about 2.9% of sales.