Safeway posts loss in 4th quarter on charges to write down value of supermarket chains

Safeway posts 4Q loss on write-downs

PORTLAND, Ore. — Safeway Inc., which posted a loss for its fourth quarter and fiscal year on Thursday, is banking on food prices to improve its results in the current year.

Safeway has struggled during the down economy. The grocery operator was slower than many to lower prices when the recession hit, leading consumers to cut their spending and intensifying the competition among grocers. Its profit suffered this year as it passed along to consumers price drops in commodities like milk and eggs.

“In the 17 years I’ve been in this business, the kind of deflation that we’ve experienced in the fourth quarter, it’s unprecedented,” CEO Steve Burd told investors during a conference call Thursday.

Safeway, based in Pleasanton, Calif., reported a loss of $1.61 billion, or $4.06 per share, for the quarter. That compares with a profit of $338 million, or 79 cents per share, in the period a year earlier.

Safeway, which operates Vons, Genuardi’s and its namesake chain, has nearly 2,000 stores across North America.

Excluding charges that primarily reflect the declining value of two of its chains, it earned 53 cents per share, which was what analysts predicted.

Safeway’s revenue fell more than 8 percent to $12.69 billion, in part because the quarter was being compared with a period that was a week longer. But it was slightly more than the $12.62 billion analysts polled by Thomson Reuters had anticipated, on average.

Safeway said it sees some of the pressure on its business moderating in the coming year.

Food deflation, which offset the company’s cost reductions during the year and increased in the fourth quarter, may subside. Burd said the company anticipates moderate inflation this year.

The company also said Thursday that its prices are now competitive with those of its peers, which has helped drive traffic and sales volume. Burd anticipates those trends will continue this year.

“I think most of us think the economy will begin to see some improvement in 2010,” Burd said.

Safeway did not offer an outlook for the year but said plans to at its investor conference in early March.

For the full year, the company reported a net loss of $1.1 billion, or $2.66 per share, compared with a profit of $965.3 million, or $2.21 per share in the prior year. Excluding one-time items, the company earned $1.74 per share for the year.

Its full-year revenue fell more than 7 percent to $40.85 billion.

Safeway shares fell sharply in early in the day but were up 81 cents, nearly 3.5 percent, to 24.31 in afternoon trading.