Safeway net income plunges in Q3

Pleasanton, Calif. – Safeway Inc. saw its net income plunge 58% from $157 million to $65.8 million during the third quarter of fiscal 2013, amid a software impairment charge, higher theft and lower property gains. Results, however, beat expectations however.

Sales grew 1.1% from $8.52 billion to $8.62 billion, driven by a 1.9% improvement in same-store sales.

Following a decision to sell its Canadian business in June of this year, Safeway is now exiting the Chicago market with the sale of its 72 Dominck’s stores in the area by early next year (link to lead story). This will result in a cash tax benefit of $400 million to $450 million which will be available in the short-term to partly offset the cash tax expense on the sale of the net assets of Canada Safeway Limited. Safeway said it expects to use the cash tax benefit and any other cash proceeds from the disposal of Dominick's properties to buy back stock and to invest in growth opportunities.

"The decision to sell Canada Safeway and to exit the Chicago market is consistent with Safeway's priority of maximizing shareholder value," said Robert Edwards, Safeway president and CEO. "These actions will allow us to focus on improving and strengthening our core grocery business. We are continuing to review all of our businesses to optimize our allocation of resources, improve sales and grow operating profits."

Safeway also cited a problem with fresh produce shrink, which it said has been corrected, as well as a software impairment charge, as negatively affecting quarterly results.

Safeway expects to record same-store sales growth of 1.6% to 1.9% for fiscal year 2013.