SAFEWAY OPERATING EARNINGS GAIN 51% DURING 3RD QUARTER
OAKLAND, Calif. -- Safeway here said last week it reduced operating expenses, raised same-store sales and increased operating earnings more than 51% in the third quarter ended Sept. 10.It marked the seventh consecutive quarter Safeway has reported improved same-store sales and the sixth straight quarter the chain has achieved lower selling, general and administrative expenses.Same-store sales rose
October 3, 1994
MARK TOSH
OAKLAND, Calif. -- Safeway here said last week it reduced operating expenses, raised same-store sales and increased operating earnings more than 51% in the third quarter ended Sept. 10.
It marked the seventh consecutive quarter Safeway has reported improved same-store sales and the sixth straight quarter the chain has achieved lower selling, general and administrative expenses.
Same-store sales rose 3.7% in the quarter and operating earnings totaled $63.7 million, or 52 cents per share. Net income, which includes an extraordinary charge of $2.7 million for early retirement of debt, totaled $61 million.
Sales at the 1,068-store chain increased 2% to $3.63 billion in the 12-week quarter.
"I feel very good about these results," Steve Burd, president and chief executive officer, said in a statement. "It is still a difficult sales environment, and we have demonstrated we can be successful in a tough market."
Safeway said its SGA expenses declined 43 basis points in the quarter to 23.33% of sales. Gross margins improved 26 basis points to 27.42% of sales.
In addition to lowering operating expenses, Safeway also reduced its interest expense by $13.4 million to $48.1 million.
Mark Husson, a securities analyst at J.P. Morgan, New York, said Safeway "produced a series of little rabbits out of a top hat" in the second quarter. "It's not like it was one great big surprise," he said, "but it was just a lot of little surprises."
The surprises, Husson said, were "surprisingly high" comparable-store sales, continued gross-margin strength and a 40-basis points reduction in operating costs. Most analysts, he said, believed Safeway's cost-cutting "would have slowed down by now."
Gary Vineberg, a securities analyst at Merrill Lynch, New York, said Safeway's operating earnings exceeded all of Wall Street's estimates. The consensus operating earnings estimate ranged from 45 to 47 cents per share.
"I had the highest estimate on the Street and they beat my estimate," he said.
3rd-QUARTER RESULTS
Qtr Ended 9/10/94 9/11/93
Sales $3.63 billion $3.56 billion
Change 2%
Same-store 3.7%
Net Income $61 million $42.1 million
Change 44.9%
Inc/Share 50 cents 34 cents
36 Weeks 1994 1993
Sales $10.7 billion $10.5 billion
Change 2.1%
Same-store 4%
Net Income $154.4 million $76.4 million
Change 102%
Inc/Share $1.26 63 cents
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