Safeway Q1 profit falls 33%

New York City Safeway said its first-quarter profit fell 33% as the grocery chain struggled with deflation in key food items and fierce competition from rivals.

Safeway earned $96 million, compared with $144.2 million in the same period last year.

Revenue rose to $9.33 billion, up from $9.23 billion a year ago.

Analysts were expecting a profit of 29 cents per share on revenue of $9.24 billion.

“We are encouraged by our volume trends in first quarter 2010, compared with fourth quarter 2009, and the trends have improved in the second quarter of 2010,” said Safeway CEO Steve Burd. “We believe we will continue to see positive trends in the second half of the year as the economy improves, deflation subsides and consumer confidence builds.”

For the year, Safeway plans to invest $0.9 to $1.0 billion in capital expenditures, open 20 new Lifestyle-format stores and complete 80 Lifestyle remodels.