Safeway's Q3 Profit Off by a Third

PLEASANTON, CA-Safeway Inc. said Thursday that its third quarter profit fell by approximately one-third due to increased expenses, a decline in sales volume and deflation in produce, dairy and fresh meat. The publicly traded operator of 1,730 stores in the US and Canada said most of the increased expenses would not be repeated in 2010, that deflation should subside soon and that volume trends are improving.

Safeway’s third quarter profit fell 35.5% to $128.8 million from $199.7 million in the same year-earlier period on a 7% decline in sales to $9.5 billion from $10.2 billion. Diluted earnings per share came in at $0.31, down 32.6% from $0.46 in the same year-earlier period but above analysts’ consensus estimate of $0.29. The sales decline was attributed to lower fuel sales, a 3.0% decline in identical-store sales for the quarter, excluding fuel, and a decline in the Canadian exchange rate.

On its quarterly conference call company president Steven Burd told analysts the largest factor in the increased expenses was a write-down of the value of its real estate, which the company has invested in heavily in recent years. The second largest factor was the decrease in sales volume.