Safeway 1Q profits up 11 percent, beating expectations

The nation's second-biggest grocery store operator earned $193.4 million, or 44 cents per share, for the January-March period, up from $174.4 million, or 39 cents per share, a year earlier.

Revenue rose 7 percent to $10 billion from $9.3 billion in the year-ago period.

Analysts surveyed by Thomson Financial expected a profit of 42 cents per share on revenue of $9.72 billion.

Safeway said identical-store sales, or sales in stores open at least one year, rose 4.5 percent, or 2.9 percent excluding fuel. But adjusting for Easter revenue, which was in the second quarter last year, those sales rose only 2 percent. Identical-store sales are a closely watched benchmark for retailers.

The latest measure continues Safeway's decelerating growth pace, a factor of decreased consumer spending nationwide. Same-store sales grew 2.7 percent last quarter, the lowest growth rate in nearly two years.

Safeway said it's lowering its expectations for identical-store sales growth for the full year, excluding fuel, to 2 percent to 2.3 percent, down from previous estimates of 3 percent to 3.2 percent.

The company maintained its guidance for the full year, and expects earnings per share of $2.25 to $2.35.

Chief Executive Steve Burd said in a conference call with investors that cost-cutting measures and price competitiveness paid off to deliver strong revenue, but that the credit squeeze and rising food prices are clearly affecting consumer behavior.

Burd said many of Safeway's 30 million customers are living paycheck to paycheck.