Updated: February 21, 2013 10:10AM
PLEASANTON, Calif. — Dominick’s parent Safeway said Thursday its net income jumped 13 percent in the fourth quarter as its customer loyalty program gained traction.
Shares rose 5 percent in morning trading on the better-than-expected results.
The Pleasanton, Calif.-based grocer says its “Just for U” customer loyalty program, which offers personalized discounts based on past purchases, is driving market share gains and profits, evidence that the investment in the program is beginning to pay off.
Safeway started the program to fend off big-box retailers and other competitors that are expanding their grocery aisles.
The company, which also runs Safeway, Vons and other chains in the U.S. and western Canada, and other supermarket chains are fighting to hold onto shoppers in an increasingly competitive market. In addition to competition from retailers such as Target and Wal-Mart, traditional supermarkets are competing more with drugstore chains and dollar stores.
In the three months ended Dec. 29, net income rose 13 percent to $244 million, or $1.02 per share. That compares with $215.6 million, or 67 cents per share, in the prior year. Excluding a benefit from a legal settlement, it earned 94 cents per share. That handily beat analyst expectations of 76 cents per share, according to a FactSet poll.
A 26 percent decline in the number of Safeway shares helped make the value of each remaining share higher.
Revenue edged up 1 percent to $13.77 billion from $13.6 billion in the prior year. Analysts expected $13.69 billion.
Revenue was helped by higher prepaid and gift card sales. Revenue in stores open at least one year, a key retail metric, rose 0.8 percent, hurt by a customer shift to generic drugs.
For the year, net income rose 15 percent to $596.5 million, or $2.41 per share. That compares with $516.7 million, or $1.49 per share in the prior year. Revenue rose 1 percent to $44.21 billion from $43.63 billion in the prior year.
Shares rose $1.01, or 5 percent, to $21.14 in morning trading. Its shares have traded in a 52-week range of $14.73 to $23.16.