Cutting Costs and Prices Should Boost Safeway's Profits in '09, Says CEO

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Cutting Costs and Prices Should Boost Safeway's Profits in '09, Says CEO

Safeway Inc. yesterday said its profits may beat Wall Street expectations next year thanks to the results of its efforts to address today's cost-conscious shoppers, as well as new real estate development ventures and continued cost-cutting.

The grocer maintained its 2008 forecast, and expects to earn $2.34 to $2.44 per share in fiscal 2009.

"We are focused on growing our business in this tough economic environment, as well as in the long run," said Steve Burd, chairman, president, and c.e.o. during the company's investors conference at its Pleasanton, Calif. Headquarters. "With the freshest asset base in the supermarket industry, a differentiated offering, and ongoing investments in everyday price, we believe we are very well positioned to improve our sales momentum in 2009."

Burd also expects Safeway's real estate development initiative - which already includes 36 projects current projects -- to help drive this momentum, as well as its Blackhawk gift card distribution network, which he said saw little negative impact from the economy.

Safeway did however, cut its identical store sales forecast from 3 to 3.2 percent to 2 to 3 percent for fiscal 2009, citing the impact of the weak economy and consumers turning to lower priced food and generic drugs.

Burd reiterated his comments from a March conference call, stressing it this drop in ID sales is a positive event driven by the chain's success with its corporate brands and the company's accommodating consumer's switch to generic prescriptions.

"When you look at corporate brands, there has been a pronounced, market-wide step up, and our step up in corporate brands as a percentage of our mix is greater than that of the industry in general," he said during that conference call.

Safeway also expects to nearly double free cash flow in 2009 to approximately $1.2 billion, and end the year with $5.4 billion in debt, down from $5.7 billion in 2007.