Safeway sales suffer, shares drop

PLEASANTON, Calif. — Safeway shares dropped dramatically as the company reported $10 billion in sales for its first quarter 2013 ended March 23, which is essentially flat as compared to the first quarter of 2012. An identical-store sales increase of 1.5% (excluding fuel) was offset primarily by the disposition of Genuardi's stores in 2012 and lower fuel sales in 2013.

Analysts had been expecting comparable sales upward of 2%, lifting quarterly sales north of $10.2 billion. Wall Street reacted quickly, Safeway shares were selling down more than 17% to $23.40. However, over the past year Safeway stock is still up more than 10%, including Thursday's dramatic drop.

Safeway's same-store sales were impacted positively by 40 basis points on account of a fiscal calendar shift, Burd said. Safeway's fiscal year 2012 ended on Dec. 29, 2012 and did not capture all New Year's holiday sales. Same-store sales are also negatively impacted by 90 basis points due to a shift to generic drugs.

Safeway's guidance for 2013 remains unchanged at $2.25 to $2.45 earnings per diluted share. But that doesn't include any sales bumps out of the company's wellness program, which is expected to launch in the next three months, according to Safeway Chairman and CEO Steve Burd.

Burd offered analysts a glimpse into that new wellness platform in March.

So the future looks bright, Burd said in a conference call with analysts. The grocer's Just 4 U loyalty program is growing at a clip of 20,000 new households per week, which will place the number of total loyalty-card users to more than 6 million by the end of the year. "Just for U usage continues to grow, and our partner fuel reward program is rolling out on schedule and resonating well with consumers," Burd said.

Safeway was able to reduce its debt load with the successful IPO last week of its Blackhawk Network Holdings, shares of which were selling for $24.32 in midday trading, down slightly 2.8%.

Safeway invested $144.9 million in capital expenditures in the first quarter of 2013. For the year, Safeway expects to invest up to $1.1 billion in capital expenditures.