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Safeway's Burd Clarifies Q4 Results that Biz Press 'Never Gets Right'

PLEASANTON, Calif. - Safeway c.e.o. Steve Burd yesterday clarified what he referred to as misconceptions in the popular business press that his company had a bad fourth quarter.

"One of the things I do on earnings days is I spend some time looking at the popular press, and they never get it right," said Burd during the Bear Stearns 14th Annual Retail, Restaurant & Consumer Conference in New York. "And I really think that, because of the Internet, those headlines really have an impact on how people behave that day. So the popular press, not understanding the difference of tax rates, say Safeway posts lower quarterly profit, or Safeway profits slip on year earlier tax gain, as if there were something unfair about the earlier tax gain."

But while the popular press saw it as a decline, he said, money managers and the pros "who understand it viewed it as a respectable 11.5 percent earnings gain."

Burd also addressed the company's drop in ID sales for the quarter, stressing it was a positive event driven by its 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. "Corporate brands sell for a lower retail, but carry a higher margin. Then there is the growth in generic drugs. If you are a thoughtful consumer looking to stretch your budget, and you are on Lipitor, you have every right to ask your doctor if [a generic] would work for you. And if it does, you're going to save a lot of money, our sales will go down and our margins will go up."

And this is just what happened, Burd said. "But because people generally didn't understand this, they saw the IDs as a negative event," he said. "These are good things. And you can expect the generic trend to continue, and you can expect the corp brand trend to continue. So I'm not saying that ID sales are not important. I'm saying that in these economic conditions and what's happening with brands and generic, you have to look beneath the ID sales."

Burd also maintained Safeway's December guidance of 2008 earnings of $2.25 to $2.35 a share, or $2.21 to $2.31 a share adjusted to exclude an extra week this year. "Regardless of what happens in the economy, we're confident that our guidance will hold true," he said.
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