Thursday, food and drug retailer Safeway Inc. (SWY) posted lower profit for the third quarter, as sales slid from last year, reflecting lower fuel sales and a decline in identical-store sales as well as Canadian exchange rate. On a per share basis, earnings fell from last year, but topped the Street view. Further, the company said it is maintaining its earnings forecast for the full year.
The Pleasanton, California-based company's third-quarter net income totaled $128.8 million or $0.31 per share, compared to a profit of $199.7 million or $0.46 per share in the year-ago quarter.
On average, 16 analysts polled by Thomson Reuters expected the company to post earnings of $0.29 per share. Analysts' estimates typically exclude special items.
Quarterly sales and other revenue dropped 7.0% to $9.46 billion from the previous year's sales of $10.2 billion, but came in line with thirteen Wall Street analysts' consensus revenue estimate of $9.46 billion for the quarter.
The company attributed the 7.0% downturn in third-quarter sales to lower fuel sales that was hurt largely by lower fuel prices, a 3.0% decline in identical-store sales for the quarter, excluding fuel, and a decline in the Canadian exchange rate.
Steve Burd, Chairman, President and CEO, said, "Safeway's sales remained soft, driven largely by deflation in dairy, produce and meat, and a sluggish economy. However, we are encouraged that our household and transaction counts increased in the quarter, and that volume trends continue to improve."
For the nine-month period, the company reported net income of $511.6 million or $1.21 per share, compared to $627.4 million or $1.43 per share in the prior-year period.
Sales and other revenue for the 36 weeks ended September 12, 2009 declined to $28.2 billion from $30.3 billion in the same period of last year.
Moreover, the company noted that it expects to spend about $1.0 billion in capital expenditures, open about 10 new Lifestyle stores and complete about 85 Lifestyle remodels for the year.
Looking ahead, the company still expects earnings to range between $1.70 and $1.90 per share, while analysts are looking for earnings of $1.73 per share. Further, Safeway is also maintaining free cash flow guidance for the year of $1.1 billion - $1.3 billion.
Among Safeway's rivals, Kroger Co. (KR) reported second-quarter net income attributable to Kroger of $254.4 million or $0.39 per share, compared to $276.5 million or $0.42 per share in the year-ago quarter. Quarterly sales, including fuel, decreased to $17.7 billion from the previous year's $18.1 billion. Excluding fuel sales, total sales grew 3.5% over last year. For fiscal 2009, Kroger currently projects earnings of $1.90 - $2.00 per share, down from prior forecast of $2.00 - $2.05 per share.
Another peer, the Eden Prairie, Minnesota-based Supervalu Inc. (SVU) witnessed a downswing in first-quarter profit that amounted to $113 million or $0.53 per share, versus $162 million or $0.76 per share in the previous year, negatively impacted by lower sales amid the ongoing difficult economic environment. Net sales dropped to $12.72 billion from $13.35 billion generated in the corresponding quarter of the previous year.
Supervalu lowered its fiscal 2010 GAAP earnings outlook to a range of $1.95 - $2.15 per share from prior range of $2.44 - $2.59 per share. Excluding costs related to store closures, non-GAAP earnings for the year are currently projected to be in the range of $2.01 - $2.21 per share, lower than the previously issued forecast of $2.50 - $2.65 per share. Net sales for the 52-week fiscal year are estimated to be about $42 billion.
Safeway shares, which have been trading between $17.19 and $24.32 in the past 52 weeks, are currently trading at $22.82, up $1.39 or 6.49%, on a volume of 3.44 million shares.
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