Safeway Sees Private-Label Pressure on Brands

ELLIOT ZWIEBACH

PLEASANTON, Calif. — Safeway said yesterday that private-label sales are seeing exceptional sales growth relative to national brands.

"Although some national-brand vendors have rolled back prices, others have said they will hold the line," said Steve Burd, chairman, president and chief executive officer, in a conference call discussing fourth-quarter results. Those companies will "end up seeing market-share declines," he said, noting that the gap in growth between corporate brands and national brands is 1,000 basis points, "the biggest spread in modern times."

He said store traffic, which was down in the fourth quarter, has turned positive in the early weeks of the first quarter, with gains approaching 2%. However, after adjustments for deflation in commodities like dairy and produce, the chain is operating at essentially the same run-rate as it did in the fourth quarter, Burd said.

Net income for the 17-week fourth quarter, which ended Jan. 3, rose 12.3% to $338 million, while sales increased 3.4% to $13.8 billion, and comparable-store sales, excluding fuel, were up 0.5%. For the 53-week year, net income increased 8.7% to $965.3 million, while sales climbed 4.3% to $44.1 billion, and comps, excluding fuel, rose 0.9%. Both the most recent quarter and year had an extra week from the year-ago periods.

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