Safeway Inc. Earnings Cheat Sheet: Margins Shrink For Fifth Straight Quarter, but Profit Climbs

S&P 500 (NYSE:SPY) component Safeway Inc. (NYSE:SWY) reported net income above Wall Street’s expectations for the third quarter. Safeway 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 Third Quarter

Results: Net income for Safeway Inc. rose to $130.2 million (38 cents per share) vs. $122.8 million (33 cents per share) in the same quarter a year earlier. This marks a rise of 6% from the year earlier quarter.

Revenue: Rose 7.1% to $10.06 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: SWY beat the mean analyst estimate of 35 cents per share. It beat the average revenue estimate of $9.84 billion.

Quoting Management: “Our sales momentum continued to build in the third quarter, and our costs were well controlled,” said Steve Burd, Chairman, President and CEO. “At the same time, we continued to innovate throughout the business to meet our customers’ needs and build their loyalty. Our just for U digital marketing platform and our proprietary Open Nature line of 100% natural foods are good examples of these efforts.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell 1.1 percentage points to 27% from the year earlier quarter. Over that time, margins have contracted on average 0.8 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 2 cents in the second quarter, by one cent in the first quarter, and by 4 cents in the fourth quarter of the last fiscal year.

Revenue has risen the past four quarters. Revenue increased 7.1% to $10.2 billion in the second quarter. The figure rose 4.8% in the first quarter from the year earlier and climbed 0.9% in the fourth quarter of the last fiscal year from the year-ago quarter.

Looking Forward: Over the past ninety days, the average estimate for the fourth quarter has fallen from 66 cents per share to 64 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. The average estimate for the fiscal year is $1.69 per share, down from $1.72 ninety days ago.

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)

 

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