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Grocery operator says earnings expectations lowered

Wednesday, Dec. 8, 2004 | 11:04 a.m.

Safeway Inc., the third-largest U.S. supermarket chain and operator of Vons stores in Las Vegas, said 2005 earnings will rise less than analysts expected as the company struggles to win back Southern California customers lost during a strike.

Earnings next fiscal year will be $1.50 to $1.60 a share, Pleasanton, Calif.-based Safeway said today in a statement. That's as much as 17 cents below analysts' average estimate. Expensing stock options for the first time will subtract another 9 cents, bringing net income as low as $1.41 a share, the grocer said.

Reduced sales and higher marketing costs after a strike at its Vons chain in Southern California will cut earnings by 40 cents next year, the company said. Safeway is trimming prices and increasing promotions to narrow the price gap with discounters including Wal-Mart Stores Inc., the largest U.S. food seller.

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