"The competitive environment has softened over the last couple of quarters," said Steve Burd, Safeway's chairman, president and CEO, during the company's conference call highlighting its Q3 results. "We think that the Texas operation is going to be much better; more focused." The grocer currently has seven lifestyle stores in Texas and plans to have more as it converts its portfolio as a whole. The lifestyle stores in Texas perform in the top 10% of the company's portfolio, Burd says.

Lifestyle stores feature more upscale departments and renovated interiors. Currently, 313 units in the chain, or about 17% of the company's store base have been converted. By year's end executives say they expect that 20% of its nearly 1,800 stores will switch to the newer format.

During its Q3, which ended Sept. 10, Safeway opened five new units and renovated 74. From now until the end of the year it plans on 12 new stores and 140 renovations, bringing the lifestyle format to 20% of its total units.