Earnings Preview: Safeway to report 1Q results

Safeway's 1st-quarter earnings report could provide update on impact of loyalty program

Associated Press

NEW YORK (AP) -- Safeway Inc. reports its first-quarter results Thursday, which should give a glimpse of how the company's loyalty program is helping sales in an increasingly competitive environment.

WHAT TO WATCH FOR: The Pleasanton, Calif., operates more than 1,600 locations under names including Safeway, Vons, Dominick's and others. Analysts will be looking to see how sales at stores open at least a year perform. The metric is a key indicator of health because it strips out the impact of newly opened and closed locations.

WHY IT MATTERS: Traditional grocery chains are under growing pressure from big-box retailers, drug stores and dollar stores, which have expanded their food offerings in recent years. Specialty chains such as Whole Foods are also picking off customers.

After years of struggles, one of the nation's biggest supermarket operators, Supervalu, earlier this year announced it was selling off five of its grocery chains. The sold-off chains included Albertson's and Jewel-Osco.

In addition to improving their own grocery selections to include more international and organic offerings, Safeway and other traditional supermarkets such as Kroger have developed more sophisticated programs to cultivate shopper loyalty. At Safeway, the company said in the previous quarter that its "Just for U" program, which offers discounts based on past purchases, was driving market share gains and profits.

CEO Steven Burd said about 45 percent of its sales are from people registered for its loyalty program, with the goal to eventually get that figure to 65 percent.

WHAT'S EXPECTED: Analysts on average expect a profit of 35 cents per share on revenue of $10.15 billion, according to a survey by FactSet.

LAST YEAR'S QUARTER: The company earned 30 cents per share from continuing operations on revenue of $10 billion.

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