Safeway Boosts Pace of New-Store Openings

ELLIOT ZWIEBACH

PLEASANTON, Calif. — Safeway plans to become more aggressive in opening new stores now that its lifestyle remodeling effort is nearly complete, Steve Burd, chairman, president and chief executive officer, said here Tuesday.

Speaking to analysts at the company's annual investors conference, Burd said Safeway expects to open 26 new stores this year — the highest number in the last four years, he noted — and to complete 30 remodels, at a cost of $1 billion. That compares with $800 million spent in 2010 to open 14 new stores and remodel 60, which brought the number of lifestyle stores up to 85% of the store base.

Burd said capital expenditures of $1 billion would be approximately 2.9% of sales — the level of capital spending Safeway expects to maintain through 2015. Besides using the money to increase the number of new-store openings, Safeway will invest more in information technology and continue developing shopping centers, Burd added.

Mapping out financial guidance for the year, Burd said Safeway anticipates earnings per share of $1.60 to $1.80, with identical-store sales growth, excluding fuel, of 1% to 1.5% and free cash flow in the range of $850 million to $950 million. However, because the chain plans to make a dividend payment of $1.1 billion — moving money from Canada into the U.S. — it will incur an income tax expense of approximately $175 million that will reduce earnings by 15 cents, to a range of $1.45 to $1.65 per share, with free cash flow cut to $750 million to $850 million.