CEO: SAFEWAY PLANS TO STAY THE COURSE

ELLIOT ZWIEBACH

SAN RAMON, Calif. -- This year, Safeway plans to stay locked-in on the same priorities -- slicing costs, boosting sales and improving capital management -- of the past three years, Steven A. Burd, president and chief executive officer, said at the chain's annual meeting here last week. "We must not get distracted," Burd declared.

Oakland, Calif.-based Safeway has cut operating and administrative costs for 12 consecutive quarters, while no other chain it competes with has reduced costs for more than two quarters in a row, Burd noted. "We still have the best opportunities of all our competitors to reduce costs further in ways that are invisible to customers," he said. Safeway also intends to stay focused on bolstering sales, Burd said, "because they are the lifeblood of any retail company, and we're determined to hold on to our market-share gains." He added that the company also plans to "put capital to work effectively by continuing to be disciplined going forward, as we spend increasing amounts of money, to beat our own imposing return rate." Answering questions from the audience, Burd made the following observations:

Safeway is not enamored of frequent shopper cards. Burd said the chain has offered a loyalty card at its Eastern division for three or four years, "and we still regard it as experimental as we try to determine whether we get any added value. "But it's significant that we have not rolled it out after three or four years. We're aware of several companies that offer such cards, but the reviews are still mixed."

Despite a lack of inflation, Safeway's sales have grown in Vancouver and Arizona over the past three years in real terms, "and we feel good that we could grow sales in a lackluster economy," Burd said. "Now that we're seeing some modest inflation, it can only be a positive for us."

Non-union competitors like Wal-Mart, which have relied on appreciation of their stock prices to produce additional funding for employee overhead, "can no longer do so, and they will have to pay out more directly from earnings, which we find encouraging," Burd said.