Safeway Seeks to Clarify 4Q Results

ELLIOT ZWIEBACH

NEW YORK — In a presentation at the Bear Stearns Retail, Restaurant & Consumer Conference here last week, Safeway's top executive defended the company's fourth-quarter results, released late last month, blaming “the popular press” and the Internet for “confusion” that resulted in a 7% drop in the chain's stock price the day the numbers were disclosed.

Steve Burd, chairman, president and chief executive officer, Safeway, said the cost-reduction program Safeway instituted early in the fourth quarter had nothing to do with results for the period. “We simply have gone back to our roots,” he explained.

He said Safeway cut shrink by $166 million over the last two years, “and we expect to cut $50 million more this year — and to possibly beat that number — and there could be another $300 million in shrink reduction beyond 2008.”

In explaining his earnings outlook (see Page 1), Burd said that as the conversion of lifestyle stores is completed over the next two years, earnings will grow over and above normal growth rates by an additional 27 cents per share in 2010 and 11 cents more in 2011 and 2012, while free-cash flow will reach the $1 billion range by 2010.

He said earnings per share should hit $2.23 this year, $2.50 in 2009, $2.80 in 2010 and $3.07 in 2011.

He also said Safeway plans to have its first “experimental format” store — a smaller unit of approximately 20,000 square feet, according to reports — “up and running in May. And although it's an experiment, we are feeling increasingly good about how it might perform,” he said.