The retailer is in the midst of the renovations as it scales back its store-opening program. Through the first two quarters of the fiscal year, Safeway only opened five new units, but undertook 82 renovations. So far this year the company spent $753.1 million on the remodel program and is targeting $1.7 billion for the year.

During Safeway's second-quarter conference call, Steve Burd, the company's chairman and chief executive officer, said that the chain will focus on renovations as opposed to new openings for the next few years. "We still think that's the right course of action given that we've got another 50% of our stores to lifestyle," he say, adding. "We're very alert to good real estate that comes up, and sometimes we'll buy it and secure it for a future store site."

In response to an analyst's question, Byrd acknowledged that his chain might be losing physical market share in some regions where competitors, like British retailer Tesco, are rapidly opening new stores. He says that strong sales at the lifestyle locations are making up for the closing square footage gap. "Despite a very modest store-building program, we are still gaining market share," he says. "It hasn't hurt us. It hasn't hurt our ability to grow earnings."