Safeway's EPS above analyst expectations

PLEASANTON, Calif. — Safeway surprised analysts Thursday morning with fourth-quarter earnings per share of 62 cents, well above a consensus of 57 cents among analysts.

Total sales were up 0.9% to $12.8 billion in the fourth quarter. Higher fuel sales and an increase in the Canadian exchange rate were offset by reduced sales due to store closures and a 0.8% decline in identical-store sales, excluding fuel, the grocer reported. Same-store sales, excluding fuel, declined 0.5%. Fuel sales rose 23%.

Share value on the NYSE was up 14 cents in mid-day trading to $22.19.

"We are pleased with the improving trends in sales in 2010, driven by our price reductions, reinvigorated private-label brands and targeted marketing,” stated Safeway chairman, president and CEO Steve Burd. “All of our trends are improving, and those trends are continuing into the first quarter," he told analysts Thursday morning. “Our sales improvements are coming from our best customers — who shop more often,” Burd said. That suggested customer retention is on the rise, he added.

Identical-store sales improved each quarter and improved shrink control was a fourth-quarter highlight, Burd said. “We think we did a very good job this year of managing cost but it was hidden from view by deflation,” he said. Burd projected price inflation of more than 1% going forward, and wouldn’t be surprised if inflation eclipsed 2%. Right now, he said, virtually all retailers are passing those price increases along to the consumer.

Safeway plans to issue a press release announcing earnings guidance for March 8.