Safeway Sees Private-Label Surge

ELLIOT ZWIEBACH

PLEASANTON, Calif. — Safeway here said last week that growth in corporate-brand sales is outpacing growth in national brands by a factor of 4 to 1 storewide and 6 to 1 in the center of the store — “the strongest evidence that consumers are trading down and looking for value,” Steve Burd, chairman, president and chief executive officer, said in a conference call to discuss first-quarter earnings.

The growth rates of national and corporate brands were about equal a year ago, he said. The shift began in the fourth quarter of last year and accelerated during the first quarter, which ended March 22.

That shift toward more private label helped boost net income 10.9% to $193.4 million in the first quarter, while sales — which reflected a shift of Easter from last year's second quarter — climbed 7.3% to $10 billion.

Comparable-store sales, excluding fuel, rose 3.1%. Identical-store sales, excluding fuel, increased 2.9%, with the shift from this year's early Easter adding 0.9% to that number.

Burd said he expects sales to continue to be soft through the second quarter, “and if there is no change in the economy for the better or worse, we would anticipate some improvement in the third and fourth quarters because of the investments we're making in corporate brands to accommodate the consumer's interest in value.”

Safeway lowered its guidance on IDs for the year from a range of 3% to 3.2% down to a range of 2% to 2.3%, “though if corporate-brand growth continues, that will have a positive impact on IDs,” Burd said.

Asked about the new format Safeway plans to test, he said the first store will be up and running “by June.”

He noted that most observers believe the store will be a small format, though he did not confirm or deny that it is. “We prefer to work with it, refine it, tune it, and then, if it meets expectations, it could become a concept with a greater number of locations. But we prefer to do it quietly, and when we succeed, we'll let you know.”