LOS ANGELES (Reuters) - Supermarket chain Safeway Inc posted a quarterly profit that missed Wall Street estimates on Thursday, hurt by the company's efforts to lower prices, and shares fell 11 percent in early trade.
The operator of stores such as Safeway, Vons and Dominick's is working to lower its prices at a time when food and personal care product sellers like Kraft Foods Inc
The company, which is battling the perception that its prices are higher than its peers, said net income for the fourth quarter ended January 3 rose to $338 million, or 79 cents per share, from $301.1 million, or 68 cents per share, a year earlier.
Excluding damages from Hurricane Ike, the company earned 80 cents per share in the most recent quarter, missing analysts' consensus estimate for earnings of 81 cents per share, according to Reuters Estimates.
Total sales rose 3.4 percent to $13.8 billion, helped by the additional week in 2008 and identical-store sales increases, excluding fuel, of 0.4 percent, partly offset by a decrease in the Canadian exchange rate and lower fuel sales.
Safeway defines identical stores as those operating in the same period during the current and previous years. The figure does not include replacement stores.
Excluding the 0.66-percentage-point benefit from improved gross margin on fuel sales, gross profit declined 0.57 percentage point. The decline was the result of the company's push to lower prices on key items, partly offset by lower advertising expense and higher revenue from third-party gift cards.
The grocery chain confirmed its 2009 forecast of earnings of $2.34 to $2.44 per share and free cash flow of $1 billion to $1.2 billion.
According to published reports, Safeway temporarily suspended shipments of P&G products at year end.
Shares were down $2.35 at $18.77 in early trading on the New York Stock Exchange.
(Reporting by Lisa Baertlein)
