Safeway reports Q4 sales, projects Q1 comps of 2% based on strong uptake in loyalty program

PLEASANTON, Calif. — Safeway on Thursday reported a sales increase of 1.3% to $44.2 billion in 2012 for its fiscal year ended Dec. 29, driven by increased fuel sales and a same-store sales increase of 0.5% (excluding fuel), the grocer reported. Safeway chairman and CEO Steve Burd projected identical sales as high as 2% in the first quarter of 2013, in part because of the success Safeway has had with its loyalty program Just 4 U. 

"As Just 4 U matures … our volume, our marketshare and our ID sales should only continue to improve," Burd said. Safeway currently has 5.4 million active Just 4 U cardholders who represent 45% of the grocer's sales. Burd expects Just 4 U customers will one day be responsible for 65% of Safeway sales. Burd noted that Safeway is signing some 50,000 Just 4 U cardholders each week. Burd wasn't sure if that adoption rate was sustainable through the rest of the year, "but if we do, we should cross over 55%-plus of our sales covered by Just 4 U households."

"Mobile users [participating in the program] are higher than we have predicted," noted Robert Edwards, Safeway president. Mobile users' contribution to incremental sales is higher and their trips are more frequent, he added.

"[Contribution] is higher by about 40%," Burd said. 

And Safeway is not concerned about any reduction in disposable income from the increase in Social Security tax and delay in income tax returns. In fact, the change in disposable income "plays to the strength of Just 4 U," Edwards noted, because Safeway can target those customers with personalized promotions. 

"Longer term, you will see others try to personalize their efforts with consumers," Burd said. "The retailer that comes to mind that's done more of this than anyone is actually Nordstrom," he added. "The wave of the future is personalization. We will come to a point where the shelf pricing will become irrelevant."

Safeway plans to gravitate more and more toward personalized promotions through Just 4 U, Burd said. "There is an opportunity to get out of paper ads and make the ad itself personalized for every household." 

And in the second quarter, Safeway will be launching its much-anticipated wellness initiative. Initially, Safeway's wellness program was to have launched in the fourth quarter of 2012. However, Safeway's technology partner had delayed that launch to ensure the infrastructure was in place to support a full roll-out, Burd said.  

Net income for the fiscal year 2012 increased to $596.5 million, to $2.40 per diluted share, up from net income for 2011 of $516.7 million or $1.49 per diluted share. Safeway's fiscal year 2011 ended on December 31, 2011 and therefore captured New Year's holiday sales. Safeway's fiscal year 2012 ended on December 29, 2012 and therefore did not capture all New Year's holiday sales.

Safeway invested $240.4 million in capital expenditures in the fourth quarter of 2012. The company opened three new Lifestyle stores, completed two Lifestyle remodels and closed six stores. For the year, Safeway invested $927.6 million in capital expenditures, opened nine new Lifestyle stores, completed four Lifestyle remodels and closed 46 stores (including 25 Genuardi's stores sold or closed during the year).