Safeway’s 15% Profit Rise Disappoints

Shares of Safeway Inc. tumbled after the firm disappointed investors by matching Wall Street earnings estimates for its fiscal third quarter. Pleasanton, Calif.-based Safeway, the nation’s second-largest supermarket chain, said its profit rose 15% in the latest quarter to $223.4 million, or 44 cents a share. The results matched the average estimate of analysts surveyed by First Call Corp. but they were less than estimates of 46 cents published on the StreetIQ Web site, https://www.streetiq.com. The company said recent acquisitions helped boost revenue by 16% to $6.48 billion, but sales at stores open at least a year edged up just 1%. The company faced tough sales comparisons from the year-ago quarter, when same-store sales rose more than 4.8%, analysts said. Safeway’s shares fell $4.19 to close at $38.06 on the NYSE. Earlier, the shares fell as low as $36.31. Investors said concerns that Safeway’s gross margins will be hurt by rising costs and slowing sales contributed to the recent decline in its shares. The company’s earnings report showed that gross margins, which measure profit as a percentage of sales, widened slightly to 29.6% of sales from 29.5%. Some analysts had expected them to widen to 29.7%.