Safeway Inc. Announces Fourth Quarter 2012 Results

Thu Feb 21, 2013 9:03am EST

* Reuters is not responsible for the content in this press release.

  PLEASANTON, CA, Feb 21 (Marketwire) -- 
Safeway Inc. (NYSE: SWY)

    Results From Operations
 Safeway Inc. today reported net earnings from
continuing operations of $1.06 per diluted share for the fourth quarter
which ended December 29, 2012. This includes a $0.12 per diluted share
benefit from legal settlements. When you exclude this benefit, earnings
per diluted share is $0.94. This represents a 58% improvement in earnings
per diluted share over last year when the settlements are included and a
40% improvement when the settlements are excluded. Other highlights of
the quarter include:


--  Our third consecutive quarter of U.S. unit market share gains with a
    38 basis-point improvement in the supermarket channel and a 10
    basis-point improvement across all outlets.
    
    
--  An identical-store sales increase (excluding fuel) of 0.8%, which was
    negatively impacted by a calendar shift* of 0.3% and a generic drug
    impact of 0.7%.
    
    
--  A unit volume increase of 0.3% in the U.S., when the market
    supermarket channel declined 2.1% and all outlets declined 0.6% in our
    U.S. markets.
    
    
--  Operating profit margin improvement of 39 basis points including the
    gain from legal settlements and 10 basis points when you exclude the
    settlements, fuel sales and fuel partner discounts.

    

"We are pleased with our results for the quarter," said Steve Burd,
Safeway's Chairman and Chief Executive Officer. "While the calendar shift
of New Year's Eve and the shift to generic drugs had a significant drag
on reported ID sales, our just for U(TM) and fuel loyalty programs are
driving market share gains and profits."

    Sales and Other Revenue
 Sales and other revenue increased 1.2% to $13.8
billion in the fourth quarter of 2012. This increase was largely due to
higher gift and prepaid card sales and a 0.8% increase in identical-store
sales, excluding fuel, partly offset by the disposition of the Genuardi's
stores.

    * Safeway's fiscal year 2011 ended on December 31, 2011 and therefore
captured New Year's holiday sales. Safeway's fiscal year 2012 ended on
December 29, 2012 and therefore did not capture all New Year's holiday
sales.

    Gross Profit
 Gross profit declined 21 basis points to 26.50% of sales in
the fourth quarter of 2012 compared to 26.71% of sales in the fourth
quarter of 2011. Excluding the 10 basis-point impact from fuel sales and
fuel partner discounts, gross profit declined 11 basis points due
primarily to investments in price, partially offset by the gross margin
benefit from the shift to generic drugs. 

    Operating and Administrative Expense
 Operating and administrative
expense decreased 60 basis points to 23.24% of sales in the fourth
quarter of 2012 from 23.84% of sales in the fourth quarter of 2011.
Excluding the 38 basis-point impact of the $46.5 million gain from legal
settlements and the one basis-point impact from fuel sales, operating and
administrative expense decreased 21 basis points. This decrease was
primarily the result of lower store labor costs and lower store occupancy
costs, partly offset by lower property gains. 

    Interest Expense
 Interest expense increased to $87.7 million in the
fourth quarter of 2012 from $84.3 million in the fourth quarter of 2011
due to higher average borrowings, partly offset by lower average interest
rates.

    Income Taxes
 Income tax expense was 31.0% of pre-tax income in the
fourth quarter of 2012 compared to 30.0% in the fourth quarter of 2011. 

    Discontinued Operations
 In January 2012, Safeway announced the planned
sale or closure of its Genuardi's stores located in the eastern United
States. In the fourth quarter of 2012, these transactions were completed
with a pre-tax loss of $15.8 million ($9.6 million, after tax). For the
year, the sale and closure of Genuardi's stores generated cash proceeds
of $107.0 million and a pre-tax gain of $52.4 million ($31.9 million
after tax). 

    Annual Results
 Net income for the fiscal year 2012 increased to $596.5
million ($2.40 per diluted share) from net income for 2011 of $516.7
million ($1.49 per diluted share). Income from continuing operations
increased to $566.2 million ($2.27 per diluted share) in 2012 from $518.2
million ($1.49 per diluted share) in 2011. Net income in 2012 benefited
from the $46.5 million gain ($28.4 million after tax, or $0.12 per
diluted share) from legal settlements while net income in 2011 was
reduced by the $98.9 million tax charge ($0.29 per diluted share) from
the Canadian dividend paid in the first half of 2011. 

    Sales increased 1.3% to $44.2 billion in 2012 from $43.6 billion in 2011.
This increase was primarily due to increased fuel sales, higher gift and
prepaid card sales and an identical-store sales increase (excluding fuel)
of 0.5%, partially offset by the disposition of the Genuardi's stores.

    Gross profit margin declined 52 basis points to 26.51% in 2012 from
27.03% in 2011. Excluding the 30 basis-point impact from fuel sales,
gross profit declined 22 basis points, primarily due to investments in
price and cost incurred to launch our just for U loyalty program, partly
offset by lower LIFO expense. 

    Operating and administrative expense decreased 42 basis points to 24.01%
in 2012 from 24.43% in 2011. Excluding the 16 basis-point impact from
fuel sales, operating and administrative expense decreased 26 basis
points primarily because of the gain from legal settlements and lower
labor expense. 

    Income tax expense decreased to 31.7% of pre-tax income in 2012 from
41.3% in 2011 primarily due to a $98.9 million tax charge in 2011
resulting from the repatriation of $1.1 billion of earnings from
Safeway's wholly-owned Canadian subsidiary.

    Cash Flow
 Net cash flow provided by operating activities decreased to
$1,569.7 million in 2012 from $2,023.6 million in 2011. This decrease was
due primarily to a greater use of cash flow for working capital which was
largely calendar driven. 

    Net cash flow used by investing activities decreased to $572.0 million in
2012 from $1,014.5 million in 2011 primarily due to increased proceeds
from the sale of properties, net cash proceeds from discontinued
operations and lower capital expenditures in 2012.

    Net cash flow used by financing activities increased to $1,373.8 million
in 2012 from $1,077.3 million in 2011 due primarily to lower net
additions to debt in 2012, partially offset by a lower level of stock
repurchases in 2012.

    Capital Expenditures
 Safeway invested $240.4 million in capital
expenditures in the fourth quarter of 2012. The company opened three new
Lifestyle stores, completed two Lifestyle remodels and closed six stores.
For the year, Safeway invested $927.6 million in capital expenditures,
opened nine new Lifestyle stores, completed four Lifestyle remodels and
closed 46 stores (including 25 Genuardi's stores sold or closed during
the year).

    Stock Repurchases
 Safeway did not repurchase any shares of its common
stock during the fourth quarter of 2012 under its previously announced
share repurchase program. During 2012, Safeway repurchased 57.6 million
shares of its common stock at an average cost of $21.51 per share and a
total cost of $1,240.3 million (including commissions). The remaining
board authorization for stock repurchases at year-end was approximately
$0.8 billion.

    Share repurchases in 2012, net of incremental interest expense, increased
diluted earnings per share by $0.17 in the fourth quarter of 2012 and
$0.32 for the year 2012. 

Guidance
 Safeway will issue a press release
announcing earnings guidance for 2013 on Wednesday, March 6, 2013 in
conjunction with our annual investor conference. 

    About Safeway
 Safeway Inc. is a Fortune 100 company and one of the
largest food and drug retailers in North America based on sales. The
company operates 1,641 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
fourth-quarter results will be broadcast live over the internet at
www.safeway.com/investor_relations at 8:00 a.m. PT on February 21, 2013.
Click on Upcoming Events to access the call. A replay will be available
via webcast for approximately one week following the conference call.

    This press release and related conference call contain 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, market share gains
and profits. 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; sales volume
levels and price per item trends; 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 existing or new business ventures,
including our Blackhawk and Property Development Centers subsidiaries;
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; 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 and effects from natural disasters;
performance in new business ventures or other opportunities that we
pursue; 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, as amended, 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)

                            16 Weeks Ended              52 Weeks Ended
                      --------------------------  --------------------------
                      December 29,  December 31,  December 29,  December 31,
                          2012          2011          2012          2011
                      ------------  ------------  ------------  ------------

Sales and other
 revenue              $  13,767.4   $  13,597.6   $  44,206.5   $  43,630.2 
Cost of goods sold      (10,118.6)     (9,965.2)    (32,486.5)    (31,836.5)
                      -----------   -----------   -----------   ----------- 
Gross profit              3,648.8       3,632.4      11,720.0      11,793.7 
Operating and
 administrative                                                   (10,659.1)
 expense                 (3,200.0)     (3,242.3)    (10,615.9)
                      -----------   -----------   -----------   ----------- 
Operating profit            448.8         390.1       1,104.1       1,134.6 
Interest expense            (87.7)        (84.3)       (304.0)       (272.2)
Other income, net             8.5           3.9          28.3          19.7 
                      -----------   -----------   -----------   ----------- 
Income before income
 taxes                      369.6         309.7         828.4         882.1 
Income taxes               (114.6)        (92.9)       (262.2)       (363.9)
                      -----------   -----------   -----------   ----------- 
Income from
 continuing
 operations, net of
 tax                        255.0         216.8         566.2         518.2 
(Loss) gain from
 discontinued
 operations, net of
 tax                         (9.6)            -          31.9             - 
                      -----------   -----------   -----------   ----------- 
Net income before
 allocation to
 noncontrolling
 interests                  245.4         216.8         598.1         518.2 
Noncontrolling
 interests                   (1.4)         (1.2)         (1.6)         (1.5)
                      -----------   -----------   -----------   ----------- 
Net income
 attributable to
 Safeway Inc.         $     244.0   $     215.6   $     596.5   $     516.7 
                      ===========   ===========   ===========   =========== 

Basic earnings per
 common share:
  Continuing
   operations         $      1.06   $      0.67   $      2.28   $      1.49 
  Discontinued
   operations               (0.04)            -          0.13             - 
                      -----------   -----------   -----------   ----------- 
  Total               $      1.02   $      0.67   $      2.41   $      1.49 
                      ===========   ===========   ===========   =========== 

Diluted earnings per
 common share:
  Continuing
   operations         $      1.06   $      0.67   $      2.27   $      1.49 
  Discontinued
   operations               (0.04)            -          0.13             - 
                      -----------   -----------   -----------   ----------- 
    Total             $      1.02   $      0.67   $      2.40   $      1.49 
                      ===========   ===========   ===========   =========== 

Weighted average
 shares outstanding:
  Basic                     237.1         321.6         245.6         343.4 
                      ===========   ===========   ===========   =========== 
  Diluted                   237.3         321.6         245.9         343.8 
                      ===========   ===========   ===========   =========== 


    

                        SAFEWAY INC. AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                   (In millions, except per-share amounts)
                                 (Unaudited)

                                                        Year-end   Year-end 
                                                          2012      2011(1) 
                                                       ---------- ----------
ASSETS
Current assets:
Cash and equivalents                                   $   352.2  $   729.4 
Receivables                                                909.0      652.1 
Merchandise inventories                                  2,562.0    2,469.6 
Prepaid expense and other current assets                   344.7      335.7 
                                                       ---------  --------- 
Total current assets                                     4,167.9    4,186.8 
Total property, net                                      9,224.6    9,637.6 
Goodwill                                                   471.5      469.8 
Investment in unconsolidated affiliate                     191.7      196.8 
Other assets                                               601.3      582.6 
                                                       ---------  --------- 
Total assets                                           $14,657.0  $15,073.6 
                                                       =========  ========= 

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of notes and debentures             $   294.0  $   811.3 
Current obligations under capital leases                    36.2       29.2 
Accounts payable                                         3,125.0    2,917.0 
Accrued salaries and wages                                 460.9      500.9 
Deferred income taxes                                       45.7       77.8 
Other accrued liabilities                                  643.8      675.9 
                                                       ---------  --------- 
Total current liabilities                                4,605.6    5,012.1 
Long-term debt:
Notes and debentures                                     4,831.9    4,165.0 
Obligations under capital leases                           411.6      404.7 
                                                       ---------  --------- 
Total long-term debt                                     5,243.5    4,569.7 
Deferred income taxes                                      178.5      141.9 
Pension and post-retirement benefit obligations            914.5      904.5 
Accrued claims and other liabilities                       781.5      730.1 
                                                       ---------  --------- 
Total liabilities                                       11,723.6   11,358.3 

Stockholders' equity:
  Common stock: par value $0.01 per share; 1,500
   shares authorized; 605.3 and 604.5 shares issued          6.1        6.0 
Additional paid-in capital                               4,505.6    4,463.9 
  Treasury stock at cost: 365.8 and 307.9 shares        (9,119.8)  (7,874.4)
  Accumulated other comprehensive loss                     (73.8)     (61.5)
Retained earnings                                        7,609.8    7,175.3 
                                                       ---------  --------- 
Total Safeway Inc. equity                                2,927.9    3,709.3 
Noncontrolling interests                                     5.5        6.0 
                                                       ---------  --------- 
Total equity                                             2,933.4    3,715.3 
                                                       ---------  ----------
Total liabilities and stockholders' equity             $14,657.0  $15,073.6 
                                                       =========  ========= 
  (1) Other accrued liabilities, deferred income taxes (current) and
   retained earnings have been restated to correct an error in the
   accounting for property taxes.

                        SAFEWAY INC. AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                          (In millions, unaudited)

                                                        52 Weeks   52 Weeks 
                                                          2012       2011
                                                       ---------- ----------
OPERATING ACTIVITIES:
Net income before allocation to noncontrolling
 interest                                              $   598.1  $   518.2 
Gain from discontinued operations, net of tax              (31.9)         - 
                                                       ---------  --------- 
Income from continuing operations, net of tax              566.2      518.2 
Reconciliation to net cash flow from operating
 activities:
  Depreciation expense                                   1,134.3    1,148.8 
  Property impairment charges                               46.5       44.7 
  Share-based employee compensation                         55.1       50.0 
  LIFO expense                                               0.7       35.1 
  Equity in earnings of unconsolidated affiliate           (17.5)     (13.0)
  Net pension and post-retirement benefits expense         150.8      114.3 
  Contributions to pension and post-retirement benefit
   plans                                                  (159.5)    (176.2)
  Gain on property dispositions and lease exit costs,
   net                                                     (79.1)     (65.6)
  Increase in accrued claims and other liabilities          44.8       23.2 
  Deferred income taxes                                    (36.0)     (63.7)
  Other                                                     13.0       23.5 
  Changes in working capital items:
    Receivables                                             (5.6)      (2.1)
    Inventories at FIFO cost                               (84.7)      95.0 
    Prepaid expenses and other current assets              (27.5)     (13.1)
    Income taxes                                           (82.7)      91.4 
    Payables and accruals                                   24.5      (80.5)
    Payables related to third-party gift cards, net of
     receivables                                            26.4      293.6 
                                                       ---------  --------- 
      Net cash flow from operating activities            1,569.7    2,023.6 
                                                       ---------  --------- 

INVESTING ACTIVITIES
Cash paid for property additions                          (927.6)  (1,094.7)
Proceeds from sale of property                             300.8      188.0 
Net cash proceeds from discontinued operations             107.0          - 
Investments and business acquisitions                          -      (35.9)
Other                                                      (52.2)     (71.9)
                                                       ---------  --------- 
      Net cash used by investing activities               (572.0)  (1,014.5)
                                                       ---------  --------- 

FINANCING ACTIVITIES
Additions to (payments on) short-term borrowings, net        1.2       (0.8)
Additions to long-term borrowings                        3,623.4    3,697.5 
Payments on long-term borrowings                        (3,551.6)  (3,087.6)
Purchase of treasury stock                              (1,274.5)  (1,554.0)
Dividends paid                                            (163.9)    (188.0)
Net proceeds from exercise of stock options                  3.8       73.4 
Excess tax benefit from share-based employee
 compensation                                                1.3        1.8 
Other                                                      (13.5)     (19.6)
                                                       ---------  --------- 
      Net cash flow used by financing activities        (1,373.8)  (1,077.3)
                                                       ---------  --------- 
Effect of changes in exchange rates on cash                 (1.1)      18.8 
                                                       ---------  --------- 
Decrease in cash and equivalents                          (377.2)     (49.4)

CASH AND EQUIVALENTS
Beginning of year                                          729.4      778.8 
                                                       ---------  --------- 
End of year                                            $   352.2  $   729.4 
                                                       =========  ========= 

                        SAFEWAY INC. AND SUBSIDIARIES
                          SUPPLEMENTAL INFORMATION
                            (Dollars in millions)
                                 (Unaudited)

                                        16 Weeks Ended      52 Weeks Ended
                                      ------------------  ------------------
TABLE 1: CAPITAL EXPENDITURES AND      Dec 29,   Dec 31,   Dec 29,   Dec 31,
 OTHER STATISTICAL DATA                 2012      2011      2012      2011
                                      --------  --------  --------  --------

Cash paid for capital expenditures    $  240.4  $  412.2  $  927.6  $1,094.7
Stores opened                                3        11         9        25
Stores closed                                6        14        46        41
Lifestyle remodels completed                 2        10         4        29
Stores at end of period                  1,641     1,678
Square footage (in millions)              77.6      79.2

Fuel sales                            $1,447.3  $1,393.2  $4,974.2  $4,596.6
Number of fuel stations at end of
 period                                    407       400
Increase (decrease) in sales from
 change in Canadian exchange rate     $   59.4  $  (12.7) $  (63.9) $  240.0

TABLE 2: RECONCILIATION OF NET INCOME ATTRIBUTABLE TO SAFEWAY INC. TO
 ADJUSTED EBITDA

                                        Fiscal
                                         Year
                                         2012
                                      --------
Net income attributable to Safeway
 Inc.                                 $  596.5
Add (subtract):
  Property impairment charges and tax
   expense from discontinued
   operations                             27.7
  Income taxes                           262.2
  Interest expense                       304.0
  Depreciation expense                 1,134.3
  LIFO expense                             0.7
  Share-based employee compensation       55.1
  Property impairment charges             46.5
  Equity in earnings of
   unconsolidated affiliate              (17.5)
Dividend from unconsolidated
 affiliate                                 0.7
                                      --------
Adjusted EBITDA                       $2,410.2
                                      ========

Total debt at December 29, 2012       $5,573.7
Less cash and equivalents in excess
 of $75.0 at December 29, 2012           277.2
                                      --------
Adjusted Debt, as defined by bank
 credit agreement                     $5,296.5
                                      ========

Adjusted EBITDA as a multiple of
 interest expense                         7.93 x

Minimum Adjusted EBITDA as a multiple
 of interest expense under bank           2.00 x
 credit agreement

Adjusted Debt to Adjusted EBITDA          2.20 x

Maximum Adjusted Debt to Adjusted
 EBITDA under bank credit agreement       3.50 x

                        SAFEWAY INC. AND SUBSIDIARIES
                          SUPPLEMENTAL INFORMATION
                            (Dollars in millions)
                                 (Unaudited)

TABLE 3: RECONCILIATION OF NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES TO
 ADJUSTED EBITDA

                                                               Fiscal Year
                                                                   2012
                                                               ------------ 

Net cash flow provided by operating activities                 $    1,569.7 
Add (subtract):
  Income taxes                                                        262.2 
  Interest expense                                                    304.0 
  Deferred income taxes                                                36.0 
  Net pension and post-retirement benefits
   expense                                                           (150.8)
  Contributions to pension and post-retirement
   benefit plans                                                      159.5 
  Increase in accrued claims and other
   liabilities                                                        (44.8)
  Gain on property dispositions and lease exit
   costs, net                                                          79.1 
  Changes in working capital items                                    148.0 
  Lease exit costs and gain on property
   dispositions from discontinued operations                           59.6 
  Other                                                               (12.3)
                                                               ------------ 
Adjusted EBITDA                                                $    2,410.2 
                                                               ============ 

TABLE 4: RECONCILIATION OF GAAP CASH FLOW MEASURE TO FREE CASH FLOW

                                                      Fiscal Year
                                                     2012           2011
                                                 ------------  ------------ 
Net cash flow from operating activities, as
 reported                                        $    1,569.7  $    2,023.6 
Increase in payables related to third-party gift
 cards, net of receivables                              (26.4)       (293.6)
                                                 ------------  ------------ 
Net cash flow from operating activities, as
 adjusted                                             1,543.3       1,730.0 
Net cash flow used by investing activities, as
 reported                                              (572.0)     (1,014.5)
Investments and business acquisitions                       -          35.9 
                                                 ------------  ------------ 
Net cash flow used by investing activities, as
 adjusted                                              (572.0)       (978.6)
                                                 ------------  ------------ 
Free cash flow                                   $      971.3  $      751.4 
                                                 ============  ============ 

                        SAFEWAY INC. AND SUBSIDIARIES
                          SUPPLEMENTAL INFORMATION
                                 (Unaudited)
TABLE 5: IDENTICAL-STORE SALES*
                                                        Fourth      Fiscal
                                                       Quarter       Year
                                                         2012        2012
                                                     ----------- -----------

As reported                                                 1.0%        1.2%

Excluding fuel sales                                        0.8%        0.5%

* Excludes replacement stores

TABLE 6: RECONCILIATION OF DILUTED EARNINGS PER SHARE FROM CONTINUING
 OPERATIONS, AS REPORTED, TO DILUTED EARNINGS PER SHARE FROM CONTINUING
 OPERATIONS, AS ADJUSTED

                                                      Fourth       Fiscal
                                                     Quarter        Year
                                                       2012         2012
                                                   -----------  ----------- 
Diluted earnings per share from continuing
 operations, as reported                           $      1.06  $      2.27 
Gain from legal settlements                              (0.12)       (0.12)
                                                   -----------  ----------- 
Diluted earnings per share from continuing
 operations, as adjusted                           $      0.94  $      2.15 
                                                   ===========  =========== 

                                                                   Fiscal
                                                                    Year
                                                                    2011
                                                                ----------- 
Diluted earnings per share from continuing
 operations, as reported                                        $      1.49 
Tax charge on Canadian dividend                                        0.29 
                                                                ----------- 
Diluted earnings per share from continuing
 operations, as adjusted                                        $      1.78 
                                                                =========== 

TABLE 7: RECONCILIATION OF FOURTH QUARTER 2012 OPERATING PROFIT MARGIN
 BASIS-POINT CHANGE AS REPORTED, TO BASIS-POINT CHANGE EXCLUDING FUEL AND
 GAIN FROM LEGAL SETTLEMENTS
                                                    Operating
                                        Gross    Administrative   Operating 
                                       Profit        Expense       Profit
                                     (Decrease)     Decrease      Increase
                                      Increase     (Increase)    (Decrease) 
                                     ----------  --------------  ---------- 
Basis-point increase in operating
 profit, as reported                        (21)             60          39 
Impact of fuel sales and markdowns
 from fuel partner program                   10              (1)          9 
Gain from legal settlements                   -             (38)        (38)
                                     ----------  --------------  ---------- 
Basis-point increase in operating
 profit, as adjusted                        (11)             21          10 
                                     ==========  ==============  ========== 

                 SAFEWAY INC. AND SUBSIDIARIES
                    SUPPLEMENTAL INFORMATION
                          (Unaudited)

TABLE 8: RECONCILIATION OF 2012 OPERATING PROFIT MARGIN BASIS-POINT CHANGE
 AS REPORTED, TO BASIS-POINT CHANGE EXCLUDING FUEL AND GAIN FROM LEGAL
 SETTLEMENTS

                                                    Operating
                                        Gross    Administrative   Operating 
                                       Profit        Expense       Profit
                                     (Decrease)     Decrease     (Decrease) 
                                      Increase     (Increase)     Increase
                                     ----------  --------------  ---------- 
Basis-point decrease in operating
 profit, as reported                        (52)             42         (10)
Impact of fuel sales and markdowns
 from fuel partner program                   30             (16)         14 
                                     ----------  --------------  ---------- 
Basis-point increase in operating
 profit, excluding fuel                     (22)             26           4 
Gain from legal settlements                   -             (12)        (12)
                                     ----------  --------------  ---------- 
Basis-point decrease in operating
 profit, as adjusted                        (22)             14          (8)
                                     ==========  ==============  ========== 


    


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