Safeway 1Q profits up 11 percent, beating expectations

"I can remember there was a time in my career when I did exactly the same thing. It doesn't make a difference if you make $30,000 a year or $150,000 a year. When prices go up, demand dampens. That is what we all learned in economics 101," he said.

As an example, he said regular coffee sales jumped as consumers moved away from premium brands.

Charles Cerankosky, an analyst with FTN Midwest Securities, said the grocer is proving it can weather a difficult economy and adjust quickly to changes in buying habits.

"You can't be trying to sell everybody who walks in the door $20-a-pound salmon when they are looking for $5-a-pound steak," Cerankosky said.

"What management did was frame what the worsening economy has done to their sales growth pace, and at the same time it allowed them to highlight an ability to meet earnings expectations despite that," Cerankosky said.

Safeway cut an undisclosed number of jobs in February. The cuts occurred at offices in California, Oregon, Washington, Arizona, Texas, Illinois, Maryland and Virginia. While Safeway spokesman Brian Dowling said last week that the cuts were "very modest," Burd told investors on Thursday those cuts still cost the company $5 million in severance pay.

The cuts included about 70 jobs at Safeway's Pleasanton, Calif., headquarters, according to documents filed with local government officials. Safeway employs about 200,000 workers in total.

Shares of Safeway rose 95 cents, or 3.4 percent, to $29.04 in late afternoon trading Thursday.