(Source: Business Wire)
Safeway Inc. (NYSE:SWY):
Results From Operations
Safeway Inc. today reported net income of $128.8 million ($0.31 per
diluted share) for the third quarter of 2009 compared to net income of
$199.7 million ($0.46 per diluted share) for the third quarter of 2008.
"Safeway's sales remained soft, driven largely by deflation in dairy,
produce and meat, and a sluggish economy," said Steve Burd, Chairman,
President and CEO. "However, we are encouraged that our household and
transaction counts increased in the quarter, and that volume trends
continue to improve. In addition, our year-to-date free cash flow of
$865 million is up $366 million, or 73%, over last year."
"In this difficult economy, we are working diligently to lower costs and
meet the needs of our customers with high quality products, lower
everyday prices and attractive club card specials," added Burd.
Sales and Other Revenue
Total sales declined 7.0% to $9.5 billion in the third quarter of 2009
compared to $10.2 billion in the third quarter of 2008. This decline was
the result of lower fuel sales (which was due primarily to lower fuel
prices), a 3.0% decline in identical-store sales for the quarter,
excluding fuel, and a decline in the Canadian exchange rate.
Gross Profit
Gross profit increased 78 basis points to 28.27% of sales in the third
quarter of 2009 compared to 27.49% of sales in the third quarter of
2008. Excluding the 84 basis point impact from fuel sales, gross profit
declined six basis points. This decline was largely the result of
investments in everyday price and increased advertising, partly offset
by lower LIFO expense and lower energy expense.
Operating and Administrative Expense
Operating and administrative expense declined $13.3 million to $2,396.0
million in the third quarter of 2009 from $2,409.3 million in the third
quarter of 2008. However, due to lower sales, operating and
administrative expense margin increased 164 basis points to 25.33% of
sales in the third quarter of 2009 from 23.69% of sales in the third
quarter of 2008. Excluding the 75 basis point impact of lower fuel sales
in the third quarter of 2009, operating and administrative expense
margin increased 89 basis points. This increase was primarily the result
of decreased sales leverage, increased charges from property impairments
and retirements and increased pension expense.
Interest Expense
Interest expense declined to $78.3 million in the third quarter of 2009
from $80.0 million in the third quarter of 2008 due to lower average
borrowings, partly offset by higher average interest rates.
Income Tax Expense
Income tax expense was 36.0% of pre-tax income in both the third
quarters of 2009 and 2008.
36-Week Results
Net income for the first 36 weeks of 2009 was $511.6 million ($1.21 per
diluted share) compared to $627.4 million ($1.43 per diluted share) in
the first 36 weeks of 2008.
The gross profit margin was 28.62% in the first 36 weeks of 2009
compared to 28.19% for the first 36 weeks of 2008. Operating and
administrative expense margin was 25.36% in the first 36 weeks of 2009
compared to 24.10% in the first 36 weeks of 2008.
Stock Repurchases
During the third quarter of 2009, Safeway purchased 10.2 million shares
of its common stock at an average cost of $18.84 per share and a total
cost of $191.6 million (including commissions). During the first 36
weeks of 2009, Safeway purchased 23.1 million shares of its common stock
at an average cost of $19.10 per share and a total cost of $441.8
million (including commissions). The remaining board authorization for
stock repurchases at quarter-end was approximately $720 million.
Capital Expenditures
Safeway invested $157.2 million in capital expenditures in the third
quarter of 2009. The company opened five new Lifestyle stores, completed
16 Lifestyle remodels and closed 10 stores. During the first 36 weeks of
2009, Safeway invested $602.8 million in capital expenditures, opened
seven new Lifestyle stores, completed 62 Lifestyle remodels and closed
16 stores. For the year, the company expects to spend approximately $1.0
billion in capital expenditures, open about 10 new Lifestyle stores and
complete approximately 85 Lifestyle remodels.
Cash Flow
Net cash flow provided by operating activities was $1,287.3 million in
the first 36 weeks of 2009. This was essentially flat compared to
$1,284.8 million of net cash flow provided by operating activities in
the first 36 weeks of 2008.
Net cash flow used by investing activities declined to $627.5 million in
the first 36 weeks of 2009 from $980.1 million in the first 36 weeks of
2008 because of reduced capital expenditures, partly offset by lower
proceeds from the sale of property.
Net cash flow used by financing activities increased to $677.4 million
in the first 36 weeks of 2009 compared to $209.4 million in the first 36
weeks of 2008 due primarily to a net reduction in borrowings and
increased stock repurchases.
Guidance
Safeway is maintaining earnings guidance for the year 2009 of $1.70 -
$1.90 per diluted share. Safeway is also maintaining free cash flow
guidance for the year 2009 of $1.1 billion to $1.3 billion.
About Safeway
Safeway Inc. is a Fortune 50 company and one of the largest food and
drug retailers in North America based on sales. The company operates
1,730 stores in the United States and Canada. The company's common stock
is traded on the New York Stock Exchange under the symbol SWY.
Safeway Conference Call
Safeway's investor conference call discussing third-quarter results will
be broadcast live over the Internet at www.safeway.com/investor_relations
at 8:00 a.m. PT on October 15, 2009. Click on Webcast Events to access
the call. A replay will be available via webcast for approximately one
week following the conference call.
This press release contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Such statements relate
to, among other things, estimates of diluted earnings per share,
identical-store sales, capital expenditures, free cash flow, financial
and operating results, volume trends, and Lifestyle stores. Forward-looking
statements are indicated by words or phrases such as "guidance,"
"believes," "expects," "anticipates," "estimates," "plans,"
"continuing," "ongoing," and similar words or phrases and the negative
of such words and phrases. Forward-looking statements are based
on our current plans and expectations and involve risks and
uncertainties which are, in many instances, beyond our control, and
which could cause actual results to differ materially from those
included in or contemplated or implied by the forward-looking statements.
Such risks and uncertainties include the following: general
business and economic conditions in our operating regions, including the
rate of inflation or deflation, consumer spending levels, currency
valuations, population, employment and job growth and/or losses in our
markets; pricing pressures and competitive factors, which could include
pricing strategies, store openings, remodels or acquisitions by our
competitors; results of our programs to control or reduce costs, improve
buying practices and control shrink; results of our programs to increase
sales; results of our continuing efforts to expand corporate brands;
results of our programs to improve our perishables departments; results
of our promotional programs; results of our capital program; results of
our efforts to improve working capital; results of any ongoing
litigation in which we are involved or any litigation in which we may
become involved; the resolution of uncertain tax positions; the ability
to achieve satisfactory operating results in all geographic areas where
we operate; changes in the financial performance of our equity
investments; labor costs, including benefit plan costs and severance
payments, or labor disputes that may arise from time to time and work
stoppages that could occur in areas where certain collective bargaining
agreements have expired or are on indefinite extensions or are scheduled
to expire in the near future; failure to fully realize or delay in
realizing growth prospects for new business ventures including Blackhawk
Network Holdings, Inc. ("Blackhawk"); legislative, regulatory, tax,
accounting or judicial developments, including with respect to
Blackhawk; the cost and stability of fuel, energy and other power
sources; the impact of the cost of fuel on gross margin and
identical-store sales; discount rates used in actuarial calculations for
pension obligations and self-insurance reserves; the rate of return on
our pension assets; the availability and terms of financing, including
interest rates and our ability to issue commercial paper or public debt
or to borrow under our lines of credit as a result of current financial
market conditions; adverse developments with regard to food and drug
safety and quality issues or concerns that may arise; loss of a key
member of senior management; data security or other information
technology issues that may arise; unanticipated events or changes in
real estate matters, including acquisitions, dispositions and
impairments; adverse weather conditions; performance in new business
ventures or other opportunities that we pursue, including Blackhawk; and
the capital investment in and financial results from our Lifestyle
stores. We undertake no obligation to update forward-looking statements
to reflect developments or information obtained after the date hereof
and disclaim any obligation to do so. Please refer to our reports
and filings with the Securities and Exchange Commission, including our
most recent Annual Report on Form 10-K, subsequent Quarterly Reports on
Form 10-Q, and subsequent Current Reports on Form 8-K, for a further
discussion of these risks and uncertainties.
SAFEWAY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per-share amounts)
(Unaudited)
12 Weeks Ended 36 Weeks Ended
September 12, September 6, September 12, September 6,
2009 2008 2009 2008
Sales and other revenue $ 9,458.3 $ 10,169.3 $ 28,156.8 $ 30,288.1
Cost of goods sold (6,784.2 ) (7,373.7 ) (20,098.3 ) (21,749.0 )
Gross profit 2,674.1 2,795.6 8,058.5 8,539.1
Operating and administrative expense (2,396.0 ) (2,409.3 ) (7,141.3 ) (7,299.3 )
Operating profit 278.1 386.3 917.2 1,239.8
Interest expense (78.3 ) (80.0 ) (233.7 ) (246.2 )
Other income, net 1.5 5.7 6.0 7.3
Income before income taxes 201.3 312.0 689.5 1,000.9
Income taxes (72.5 ) (112.3 ) (177.9 ) (373.5 )
Net income $ 128.8 $ 199.7 $ 511.6 $ 627.4
Basic earnings per share $ 0.31 $ 0.46 $ 1.22 $ 1.44
Diluted earnings per share $ 0.31 $ 0.46 $ 1.21 $ 1.43
Weighted average shares outstanding:
Basic 411.3 432.3 420.1 436.2
Diluted 411.9 435.0 421.2 439.4
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SAFEWAY INC.
