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Safeway CEO Not Concerned With Supervalu Pricing

July 25, 2012

On a conference call with analysts last week describing Pleasanton, Calif.-based Safeway’s second-quarter earnings, CEO Steven Burd said he was not worried by Supervalu’s announcement that it would accelerate its fair pricing plus strategy to level the playing field with competitors.

“When they first made their announcement … there was this impression that somehow they were going to invest heavily in price and somehow that was going to affect us,” Burd said in a transcript of the call by Seeking Alpha. “Well, when we look at our full book price check, it’s really not possible for them to do any price reduction that could be sustained, without turning their cash flow negative, that would even allow them to get anywhere near our prices. So there really is no need for us to react."

“Now, what we have seen in Chicago is … a lot of people say, lowering 10,000 prices. Well, they don’t tell you if three days later, they raise 12,000 prices. They just tell you about the low rate. Now I’m not saying that’s happened in Chicago, but we saw the announcement, we saw some price reduction, and in the last three weeks, we’ve sort of said, ‘Well, what’s happened to that?’ And so we don’t worry about this at all. In fact, we view this as a marketplace opportunity.”

Safeway announced profits fell 16 percent to $122.7 million in the quarter from $145.8 million a year earlier. Earnings per share rose from 41 cents to 51 cents as the company bought back 11.6 million shares of its stock.

Same-store sales rose 0.8 percent, excluding fuel sales, and revenue grew 1.9 percent to $10.39 billion from a year earlier.

Burd spent much of the conference call touting the early success of Safeway’s Just for U personalized coupon program, saying that it was seeing conversion to regular use and incremental spending tracking well ahead of expectations in the past 12 weeks.