Safeway profit falls on severance costs, price cuts

Safeway Inc.’s profit and sales slumped during its third quarter, eroded by severance charges and the supermarket giant’s ongoing price cuts to entice customers who have been battered by a dreary economy.

Pleasanton, Calif.-based Safeway earned $122.8 million on sales of $9.4 billion in its third quarter that ended Sept. 12. Compared with the same quarter a year earlier, profit fell 4.7% and sales slipped 0.6%.

Profit of 33 cents a share beat Wall Street’s predictions by 2 cents a share. Revenue matched the outlook.

Safeway also said its full-year profit would be at the lower end of the company’s previous guidance, which ranged from $1.50 to $1.70 a share.

The results for the June-September period included $12 million in charges to pay for employee severance costs. Details about the employee dismissals weren’t provided.

Same-store sales, excluding the effect of fuel sales, fell 2%. The slump in same-store sales resulted from a decline in the company’s price per item.

Safeway began its program to cut prices during the second half of 2009, and the effort is continuing.

“We continue to tailor our offerings to the changing needs of our customers,” Chief Executive Steve Burd said.

Avalos writes for the Contra Costa Times/McClatchy.