Safeway posts higher profit

NEW YORK (Reuters) - Supermarket operator Safeway Inc (SWY.N: Quote, Profile, Research, Stock Buzz) posted higher quarterly profit on Thursday, boosted by strong demand for fuel and the early Easter holiday.

The Pleasanton, California-based company, which operates stores under the Safeway, Vons, Dominick's, Genuardi's, Randalls and Tom Thumb names, said first-quarter profit rose to $193.4 million, or 44 cents a share, from $174.4 million, or 39 cents a share, a year earlier.

Its shares rose 5 percent to $29.50 in afternoon trading on the New York Stock Exchange.

Sales rose 7.3 percent to $10 billion, beating Wall Street's expectations. Analysts, on average, were expecting Safeway to earn 42 cents a share for the quarter on about $9.75 billion in sales, according to Reuters Estimates.

Like most grocery store operators, Safeway is trying to meet the challenges of rising commodity costs and cash-strapped consumers having to deal with pricier food and energy bills.

Safeway Chief Executive Steve Burd said the company's push to lower prices boosted the company's results.

"Our efforts to reduce and control costs contributed to operating margin improvement," Chief Executive Steve Burd said in a statement. "We invested in lower prices to improve our competitiveness and enhance our customer offering."

Excluding fuel sales, Safeway said identical-store sales rose 2.9 percent. Operating and administrative expense improved to 24.8 percent of sales from 25.4 percent.

Looking ahead, Burd said he was "confident" the company could increase full-year earnings between 13 percent and 18 percent. The company expects 2008 earnings ranging between $2.25 and $2.35 a share, with free cash flow of $500 million to $700 million.