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Safeway stock slides as revenue stalls, though profit rises

Safeway stock slides as revenue stalls, though profit rises
Safeway's revenue was flat for the first quarter, the Pleasanton company said. (Paul Sakuma / Associated Press)

Safeway Inc. stock slid nearly 20% in morning trading Thursday as the Northern California supermarket giant – facing competition from dollar stores and Wal-Mart – reported flat revenue in the first quarter.

The Pleasanton company said revenue for the period ended March 23 dipped slightly to $9.99 billion from $10 billion a year earlier – a dent that Safeway attributed to lower fuel sales and the sale of its Genuardi's stores.

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But same-store sales – a gauge that strips out volatility by only considering stores open at least a year and excludes the impact of fuel – rose 1.5%. Safeway also operates local chain Vons.

The measure got a boost by a calendar shift that pushed sales from the New Year holiday into the first quarter, according to Safeway. A new loyalty program called "Just for U" gained traction, as did a partnership with gas stations to offer fuel rewards.

A move to generic drugs, however, pinched results.

For the quarter, Safeway said it earned $119.9 million, or 49 cents a share, including a 14-cent-per-share tax benefit. During the same period a year earlier, the company reported $72.9 million in profit, or 27 cents a share.

Safeway also said its 1,638 stores in the U.S. and Canada gained market share for the fourth straight quarter, despite growing pressure from chains such as Wal-Mart and Target, which are expanding their grocery offerings.

Investors, however, seemed unimpressed. The company's stock was down as much as 18.9% to $22.90 a share in morning trading in New York.

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