By Lisa Baertlein
March 6 Safeway Inc issued a 2013
forecast on Wednesday that suggests profits at the
second-largest U.S. grocery store operator will surpass Wall
Street's expectations, and its shares touched their highest
level in nearly two years.
Safeway forecast 2013 earnings of $2.25 to $2.45 per share,
above Wall Street's average estimate of $2.24 per share,
according to Thomson Reuters I/B/E/S.
Excluding a 12 cent per share benefit from credit card
settlements in fiscal 2012, the new guidance implies earnings
growth of 4 percent to 13 percent, JP Morgan analyst Ken Goldman
Some investors are encouraged that Safeway may be turning
the corner after a string of lackluster profit reports.
The company, whose chains include Dominick's and Vons, has
been working to attract customers and boost sales amid tough
competition from traditional grocers such as Kroger Co
and discount retailers ranging from Wal-Mart Stores Inc
to dollar stores.
Sales in its latest quarter were helped by the expansion of
a personalized discount program called "Just for U" and fuel
discount partnerships with gas station operators such as
Chevron and ExxonMobil.
Going forward, growth in its Blackhawk gift card business
and its Property Development Centers (PDC) real estate
subsidiary also "should drive continued positive momentum," said
Steve Burd, Safeway's chairman and chief executive, who will
retire at the company's annual meeting on May 14.
The company - which already has announced plans to take
Blackhawk public - also said it is exploring putting its
Canadian property assets into a real estate investment trust.
Loblaw, Canada's largest grocer, said in December it planned
to put the vast majority of its property assets into a real
estate investment trust and some investors are lobbying for
Safeway to follow suit.
Safeway, with help from advisers, already has determined
that its U.S. assets and PDC are not good candidates for REITs,
in part because doing so would require a large upfront cash
payment, saddle shareholders with big tax liabilities and take
away the company's ability to sell real estate holdings.
Safeway expects to make capital expenditures of about $1
billion to $1.1 billion this year, when it also plans to reduce
its debt by $800 million to $4.8 billion.
Shares in Safeway were up 0.9 percent at $24.51 in late
trading on the New York Stock Exchange. The stock touched a high
of $25.14 earlier in the session, hitting its highest level
since July 2011.