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Safeway meets 2Q target
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July 9, 2001: 10:13 a.m. ET
No. 3 U.S. grocery chain hits forecasts with cost controls, increased sales
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NEW YORK (CNNfn) - Safeway Inc.'s second-quarter earnings jumped 16 percent, falling in line with Wall Street expectations Monday, excluding its Internet operations, as the No. 3 U.S. grocery chain increased sales and kept expenses in check.
For the quarter ended June 16, Pleasanton, Calif.-based Safeway (SWY: down $3.11 to $44.90, Research, Estimates) reported earnings of $325.1 million, or 63 cents a share, up from $280.9 million, or 55 cents a share, a year earlier. Analysts on average expected 63 cents a share, according to earnings tracker First Call.
Safeway posted net income of $307.3 million, or 59 cents a share, which includes a $30.1 million impairment charge related to GroceryWorks.com, its online component. Second-quarter sales increased 7.7 percent to $8 billion from $7.4 billion, the company said.
Sales at stores open at least a year, a key gauge known as same-store or comparable-store sales, increased 1.7 percent in the quarter.
The company also said it will adjust its accounting methods in the third quarter to include 50 percent of GroceryWorks' results in its income statement, reducing earnings by a penny a share in the second half of 2001.
After the adjustment, Safeway said, it remains comfortable with Wall Street's consensus forecasts for the third and fourth quarters.
Improved buying practices and growth in private label brands helped control costs and increase profit in the quarter, the company said. Yet at the same time, Safeway reported a spike in operating and administrative expenses, chiefly related to unfavorable comparisons in pension income and property gains as well as higher real estate occupancy costs.
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In April the company executed a new $2.5 billion revolving credit agreement consisting of a $1.25 billion 364-day facility and a $1.25 billion five-year facility. The agreement replaces Safeway's previous $3 billion revolving agreement, which was due to mature in April 2002. 
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