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Safeway Lowers Full-Year Earnings Guidance, To Exit Chicago Market

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Supermarket operator, Safeway Inc.’s (NYSE: SWY) fiscal third quarter income fell sharply due to weaker margin and an impairment charge. Earnings also missed analysts’ expectation but shares climbed in aftermarket hours after the company announced that it will exit Chicago market by the end of next year.

Safeway, which at present operates 72 Dominick’s stores in Chicago, believes that exiting Chicago market will be better for its business rather than bearing losses.

The Company anticipates a cash tax benefit of $400 million to $450 million for exiting the Chicago market, which will help offsetting cash tax expenses it incurred during the sales of assets in Canada.

The company intends to use funds generated from sale of Canadian assets and cash- tax benefits for share repurchases and other investment opportunities.

For the latest period, the Company posted a profit of $65.8 million or 27 cents a share compared to a net income of $157 million or 66 cents a share, in the year-earlier quarter.

Stripping out onetime items such as write-down linked to warehouse information software project and other items, the non-GAAP earnings from continuing operations stood at 10 cents a share down from 16 cents a share, in the same quarter of last year.

Total non-GAAP profit attributable to Safeway stood at 30 cents a share.

Revenue edged up 1.1% to $8.6 billion.

Analysts’ consensus estimate was for earnings of 16 cents a share on revenue of $8.52 billion.

Gross margin contracted to 25.8% from 26.2%.

Same-store sales (excluding fuel), increased 1.9% compared to growth of 0.1%, in the same period of last year.

The Company cut its full-year earnings per share estimates. Safeway now expects earnings to be in the range of 93 cents to $1 down from earlier projections of $1.02 to $1.12 a share.








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Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.

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Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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