SAFEWAY PLANS AGGRESSIVE EXPANSION

DENVER (FNS) -- Record sales, significant cost reductions and rising profit margins have spurred Safeway into an aggressive expansion mode.

xecutive officer, told shareholders at the company's annual meeting here.

All told, Safeway expects to spend $425 million in capital improvements this year "or more if we can find good projects," Burd said.

Burd cited several factors behind the company's optimism:

· Safeway has led all competing public supermarket operators for seven consecutive quarters in same-store sales, he said. Altogether, same-store sales have increased for eight consecutive quarters.

Safeway recorded a 5.2% increase in same store sales for last year's fourth quarter and a 5% increase in this year's first quarter ended March 25. "We're putting industry-leading numbers on top of industry-leading numbers," Burd said.

· Sales were up 400 million in 1994, reaching $15.6 billion from $15.2 billion in 1993.

· Earnings per share grew to $2.02 in 1994 from $1.24 in 1993.

· Operating profit reached 4.24% of sales last year, up from 3.36% in 1993.

· The company's stock price was up 20% for the first quarter, closing at $38.50.

· According to Burd, Safeway is the only company in the industry to record eight consecutive quarters of reductions in operating expenses. "We still have many costs, large and small, that we can take out of our system and make it totally invisible to our customers," he said.

One way the operator has achieved savings is by scaling down its newer stores. As reported, the company's new prototypes are 55,000 square feet, not the 62,000, square feet of the older design. Yet no sales space has been lost with the smaller units, Burd said.

The company has also streamlined its manufacturing operations, closing or selling off six manufacturing plants last year, consolidating its three Canadian divisions into one Calgary operation and reducing overhead costs 20% at its northern California facility, as reported.

The company is also consolidating 13 house brands into four under the Safeway label, while retaining the Safeway Select name for its upscale premium private-label offerings, as reported.

Last month, the company reached a new labor agreement with the United Food & Commercial Workers Union following a nine-day strike affecting 208 northern California stores, as reported. The chain said it expected the walkout to hurt second quarter sales and operating results.

But despite Safeway's emphasis on expense reductions, Burd said that labor costs have not been a consuming focus of that effort and that the company "will approach every labor negotiation looking for an appropriate cost structure for each market."