Safeway Earnings Cheat Sheet: Margins Keep Shrinking, but Net Income Increases

S&P 500 (NYSE:SPY) component Safeway Inc. (NYSE:SWY) reported net income above Wall Street’s expectations for the second quarter. Safeway Inc. is a retail supermarket chain in North America. As a food and drug retailer, the company, with its subsidiaries, operates stores that offer a range of grocery products, general merchandise and specialty departments like pharmacies and coffee shops. It also owns and operates distribution, manufacturing, and food processing facilities.

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Safeway Earnings Cheat Sheet for the Second Quarter

Results: Net income for the grocery store rose to $145.8 million (41 cents per share) vs. $141.3 million (37 cents per share) in the same quarter a year earlier. This marks a rise of 3.2% from the year earlier quarter.

Revenue: Rose 7.1% to $10.2 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: SWY beat the mean analyst estimate of 39 cents per share. It beat the average revenue estimate of $9.92 billion.

Quoting Management: “Second quarter earnings results exceeded our expectations,” said Steve Burd, Chairman, President and CEO. “Identical-store sales improved during the second quarter and into the third quarter. We remain focused on building customer loyalty and expect sales to continue to gradually improve through the second half of the year.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell 1.5 percentage points to 27% from the year earlier quarter. Over that time, margins have contracted on average 0.7 percentage point per quarter on a year-over-year basis.

The company has now topped analyst estimates for the last four quarters. It beat the mark by one cent in the first quarter, by 4 cents in the fourth quarter of the last fiscal year, and by 4 cents in the third quarter of the last fiscal year.

Revenue has now gone up for three straight quarters. In the first quarter, revenue rose 4.8% to $9.77 billion while the figure rose 0.9% in the fourth quarter of the last fiscal year from the year earlier.

Competitors to Watch: The Kroger Co. (NYSE:KR), Whole Foods Market, Inc. (NASDAQ:WFM), SUPERVALU INC. (NYSE:SVU), Winn-Dixie Stores, Inc. (NASDAQ:WINN), The Fresh Market Inc (NASDAQ:TFM), Arden Group, Inc. (NASDAQ:ARDNA), The Great Atlantic & Pacific Tea Co. (GAPTQ), Ingles Markets, Inc. (NASDAQ:IMKTA), Ruddick Corporation (NYSE:RDK), and Weis Markets, Inc. (NYSE:WMK).

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(Source: Xignite Financials)