Safeway Cuts Profit Outlook

PLEASANTON, Calif. - Safeway Inc. on Friday said it expects weaker profit for the fourth quarter and 2003, sending its shares down almost 9 percent. The No. 2 grocery chain, based in Pleasanton, Calif., was scheduled to hold an investor conference on Friday afternoon.

The grocer cited slow sales and a soft economy that is driving customers to discounters such as Wal-Mart Stores Inc. It said it expects fourth-quarter earnings per share of 78 cents to 80 cents, compared with the analysts' average estimate of 82 cents compiled by Thomson First Call.

The company forecast 2003 profit of between $2.50 and $2.65, which would be below its current 2002 outlook of $2.77 to $2.79. The First Call consensus estimates are $2.81 for 2002 and $2.92 for 2003.

Safeway Chief Executive Steve Burd said in a statement the company plans to focus on improving its merchandise offerings in order to lure back customers to boost growth. The grocer said its long-term earnings growth target of 13 percent to 15 percent now appeared "too high."

Its shares fell $1.80 to $20.80 in morning New York Stock Exchange trade, erasing more than $660 million off the company's market value. Although the stock hit a new 52-week low of $20.70, it held above a six-year low of $19.19.

Safeway's warning comes on the heels of a similar warning by No. 3 Idaho-based Albertson's a week ago.

Safeway said it expects to open 50 to 55 new stores in the coming year as part of $1.3 billion to $1.5 billion capital expenditure program.
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