Safeway Swings to Profit
Safeway Inc., proprietor of Vons and Pavilions supermarkets, said Thursday that it had swung to a profit in the fourth quarter and was on the way to recovering from the crippling Southern and Central California labor dispute that ended a year ago.
The Pleasanton, Calif.-based supermarket chain, which has nearly 300 stores in Southern and Central California, reported net income of $202.7 million, or 45 cents a share, for the quarter ended Jan. 1, compared with a loss of $695.9 million, or $1.57 a share, in the final quarter of 2003, when union workers at its local stores were out on strike.
“We’re encouraged by our progress in Southern California, and we remain confident that we will fully recover our pre-strike profit levels some time in the year 2006,” Chief Executive Steven Burd said in a conference call with analysts.
Revenue at the nation’s No. 3 grocer was up 3.1% to $11.4 billion, reflecting higher gasoline sales and Safeway’s success in luring back some of the shoppers it lost during the labor turmoil. Sales at stores open at least a year -- a key performance indicator -- rose 1.1%, not counting stores involved in the strike. Without the benefit of gasoline revenue, those sales fell 0.7%, a slight improvement from a 0.9% decline in the third quarter.
The United Food and Commercial Workers union struck Vons and Pavilions stores Oct. 11, 2003. Albertsons Inc. and Kroger Co.’s Ralphs, which were negotiating jointly with Safeway, then locked out their union employees. In all, about 59,000 workers were idled at 852 supermarkets from the Mexican border to Mammoth Lakes during the 4 1/2 -month dispute.
Fourth-quarter net income was hurt by $47.2 million in after-tax charges for strike and other expenses, compared with $991.5 million in the year-earlier quarter. The 2003 quarter also was a week longer than the 2004 quarter.
Excluding those charges, Safeway would have earned $249.9 million, or 56 cents, exceeding the average forecast of 47 cents a share from analysts surveyed by Thomson First Call.
Safeway’s stock rose 60 cents, or 3.33%, to $18.63 on the New York Stock Exchange.
Safeway’s fourth-quarter results were helped by lower operating expenses, which fell 4.8% to $2.95 billion, compared with $3.25 billion in 2003.
For 2004, Safeway posted net income of $560.2 million, or $1.25 a share, on sales of $35.8 billion. In 2003, the company lost $169.8 million, or 38 cents a share, on sales of $35.7 billion. Burd said the company still expected to earn $1.41 to $1.51 a share in 2005.
