Safeway stock takes 11% hit with report of sagging sales
Safeway, parent company of Dominick's, took a drubbing in the stock market Thursday after it reported a sales slowdown and a "slight tick down" in market share, prompting analysts to believe that shoppers' flight to cheaper stores spelled trouble.
The company's stock plunged 11 percent during the day, or $3.32, to $26.69.
(Sun-Times file)
Sales at stores open at least a year -- a key sign of retail health -- fell a disappointing 0.3 percent in the second quarter from the year-ago period, excluding gasoline sales, as shoppers chose cheaper goods.
Safeway CEO Steven Burd told analysts that the company, which still saw healthy sales at its upscale "Lifestyle" stores, had a "slight tick down" in market share for the first time in 13 quarters.
Safeway lowered its expectation for 2008 same-store sales gains, excluding fuel sales at its 360 gas stations, to an increase of 1 to 2 percent from its previously forecast 2 to 2.3 percent.
Analyst B. Craig Hutson of Gimme Credit said "the discounters and supercenters have gained market share" as worried shoppers search for bargains.
However, Hutson noted that Safeway, based in Pleasanton, Calif., reported its profit jumped 7 percent, to $234.3 million, helped by better productivity and lower advertising costs. Revenue increased 3 percent in the quarter ended June 14, to $10.12 billion, just missing analysts' forecast of $10.25 billion.