Safeway Inc. - Shareholder/Analyst Call

May.14.13 | About: Safeway Inc. (SWY)

Safeway Inc. (NYSE:SWY)

May 14, 2013 4:30 pm ET


Steven A. Burd - Former Executive Chairman, Chief Executive Officer and Chairman of Executive Committee

Robert A. Gordon - Chief Governance Officer, Senior Vice President, General Counsel and Secretary

Robert L. Edwards - Chief Executive Officer, President and Member of The Board of Directors

Steven A. Burd

I'm not going to get my cup today because I'm going to take a very brief portion of this meeting. I wanted to welcome everybody to our Annual Shareholders Meeting. By way of an agenda, I'm going to introduce the directors for next year. And then Bob Gordon, where are you Bob? Bob is going to carry the business meeting as he always has. And I'll come back up and give Robert a brief introduction and then Robert will give you sort of the state of Safeway.

So when I call your name, maybe you can stand up and -- so everybody can see who you are. Mohan Gyani; Janet Grove; George Morrow, who is on the slate. We expect him to win election; Arun Sarin; Frank Herringer; Bill Tauscher; Gary Rogers; and Ken Oder. And then replacing me will be Robert Edwards. I think you can applaud for Robert, at least. Come on. All right?

So those are the directors, and Bob if you want to come up and carry the business meeting, we'll get it underway.

Robert A. Gordon

Good afternoon, everyone. I'm calling the meeting to order. I'm glad to see you all here. We commenced distribution of the notice of this meeting on April 1, 2013, to all stockholders of record as of March 15, 2013. I have a certification from Broadridge to that effect. The list of stockholders entitled to vote at this meeting has been available for inspection for the past 10 days and is available at this meeting for an examination by any stockholder.

The Board of Directors has appointed Broadridge to act as inspector of election. The Inspector has taken the inspector's oath and submitted its preliminary report to me. The inspector's report indicates that there are in excess of 198 million shares represented at this meeting in person or by proxy, which equals more than 82% of the outstanding shares entitled to vote here today.

Accordingly, a quorum is present and the 2013 Annual Meeting of Stockholders of Safeway Inc. is duly and properly convened. The matters to be act upon at this meeting are the 4 items listed in the Proxy Statement dated April 1, 2013. The company has not received advance written notice of any other matters as required by the company's bylaws, so no other matters will be considered. Once all the items are before the meeting, we'll have a question-and-comment period regarding those business items and we'll vote on all of the items.

So Proposal 1 is the election of the directors. The nominees, as you've heard, are Janet Grove, Mohan Gyani, Frank Herringer, George Morrow, Ken Oder, Gary Rogers, Arun Sarin and Bill Tauscher. The Board has determined that each of the nominees except Mr. Tauscher who is the CEO of our Blackhawk subsidiary is independent under the company's director and independent standards in the New York Stock Exchange rules. The 8 candidates are duly nominated. The company has not received written notice of additional nominees in accordance with the procedures set forth in the company bylaws, therefore, no further nominations may be made at this time, and the nominations are closed.

Proposal 2 is advisory approval of the compensation of our named executive officers. Management has recommended that the stockholders approve on an advisory basis the compensation of our named executive officers as set forth in the Compensation Discussion and Analysis in our proxy statement.

Proposal 3 is reapproval of the 2007 Equity and Incentive Award plan. Management has recommended that the stockholders reapprove the 2007 Equity and Incentive Award plan. Reapproval of this plan is required every 5 years under Section 162(m) of the Internal Revenue Code.

And then Proposal 4, ratification of the appointment of Deloitte & Touche, the independent auditors of the company for fiscal year 2013. Adam Scott is here today representing Deloitte & Touche and is available to answer any questions.

Okay, now it's time for balloting and the polls are open for balloting on the 4 proposals properly before the meeting, including the election of directors. Any stockholder who has already voted by the Internet, phone or mail need not vote by ballot unless you want to change the vote represented on your proxy. If any stockholder wants to vote by ballot, please raise your hand right now and ballots will be brought to you. Do we have ballots? You've got them? So keep your hands up. Keep your hands up if you want a ballot here.

And then when you finish voting, raise your hand again and we'll collect you ballots.

During the balloting, we'll take questions and comments from stockholders relating to the 4 specific agenda items before this meeting. Questions and comments on matters other than the 4 agenda items can be raised during the Q&A session following Mr. Edward's presentation.

If you have a question or comment, step to the aisle, get the mic up and line up behind the person holding the microphone. Wait to be recognized by me and then state your name and whether you're a stockholder or representative of the stockholder and, please direct your questions to me. And keep your time short so that as many people that want to speak and speak as possible. So anyone have any comments on the 4 agenda items at all? If not, we'll wait until the balloting is completed and then we can collect those.

Okay, everyone is finished with the balloting? We're waiting. Okay. Now we have preliminary results to announce, this constitutes all the balloting by Internet, mail and telephone that's come in. And these preliminary results, as you can see, show that the directors earned votes in favor about 73% to 98% of the votes cast.

Proposal 2, say on pay received, 69.17% vote in favor. The equity incentive plan, 91% in favor, and Deloitte & Touche, 97.9% in favor.

The final report of the Inspector of Election will be kept with the company's records of the Annual Meeting. There being no further business before the meeting, this concludes the formal portion of the meeting and the formal portion of the meeting is now adjourned.

And now Steve Burd will come back up to make an introduction.

Steven A. Burd

That was amazing, Bob. I mean I only have like a 2-minute introduction for Robert, now I've got to say 20. Well, most of you know Robert or certainly those who work for the company. I met Robert more than 30 years ago. For the first time in 1978, and we worked together at Southern Pacific. And I thought he was a real talent then. We had our first chance to work together since the early '80s, was really in 2004 when we were in search for a new Chief Financial Officer.

And I'm a finance guy by background, so it's very difficult for finance guys to meet my standards. And Robert not only met my standard, he exceeded my standard. And for the last 9 years, I've started every morning in Robert's office. I don't know why Robert never came to my office, but we always started in your office. You won't find a CEO that is more a shareholder-focused than Robert. A CEO, that's more determined than Robert. I feel the company is on a real upswing, and I couldn't leave the company in better hands.

And with that, Robert, show us what you got.

Robert L. Edwards

I think the first order of business is to thank Steve for 21 years of service as a CEO. It's very rare in American business or any business for that matter to have a CEO who has served for that long. So Steve, for everyone here, all of our employees across North America, our shareholders where all those in the communities that we serve, we thank you very much.

I'd first like to say it's been an honor and privilege first to be an employee of Safeway but also to be the Chief Executive Officer. And so I am honored and it is a privilege for me to be employed and serving this capacity and as I see many of our employees in the audience, one of the strengths of our company is the people we have. People who are dedicated to serving customers, to doing their jobs, doing the best they can and to create value for our shareholders.

So some of the comments I may make today may constitute forward-looking statements. And those statements are based on assumptions that we made about those. There are risks and uncertainties associated with any business, and specifically ours, so we refer you to our filings with the Securities and Exchange Commission for discussion of those risks because actual results or future results may differ from the projections. And so we encourage you to refer to our SEC filings.

So always start with good news. So a year ago, today, when we had our Annual Meeting, our stock price was $18.09. And today, the stock price closed at $25.47, so an increase of 41%. So we're pleased with that, as we're pleased that the market has recognized the progress the company has made and I'll discuss a number of our key initiatives today. And then it's our long-term objective both the management team, as well as the Board of Directors that we continue to produce attractive results that the stock market will reward.

A second piece of good news, today, the Board of Directors approved an increase in our quarterly dividend from $0.175 to $0.20 a share, which is a 14% increase. On an annualized basis, that's a total dividend of $0.80 per share and a yield of about 3.1%. You can see the dates on which that will first be paid. And so I think increasing the dividends reflects both the management team, as well as the board's confidence in the company's ability to continue to produce strong financial results, and part of our strategy of being shareholder-friendly.

So today, my comments will focus on a brief review of our performance in 2012. So comments about our growth plans for 2013 and beyond, and then a quick summary at the end of the presentation.

So just by way of summary, in 2012, our total sales were $42.2 billion. Net income was $566.2 million, and reported earnings per diluted share were $2.27, which exceeded the top end of the guidance range that we had given earlier. On an adjusted basis, if you exclude some legal settlements, that would have been $2.15 a share. And then free cash flow, which is a very important metric for our shareholders, we produced $971 million of cash flow, which again exceeded the guidance range that we had initially given when we started the year. So a very solid financial performance in 2012.

So as I mentioned, both core earnings per share, as well as free cash flow, we exceeded the top end of the range of the guidance we have given.

During the year, we returned to shareholders, $1.44 billion of cash. First, $1.27 billion was used to buy back shares, and then in terms of paying a dividend, that totaled about $164 million. When we started the year, we set an ambitious goal for-profit improvement, which is a combination of a cost reduction and then growth initiatives. We exceeded that goal during 2012 and produced total savings or profit improvement of about $351 million.

We successfully completed the rollout of our Just for U program, which is our digital loyalty marketing program, which we think is best-in-class in the industry and I'll comment more on that in just a moment. We also secured 2 branded fuel partners, Chevron and Exxon, that we'll be using to provide incremental benefits for our customers.

Our Blackhawk business, which we just did an IPO here a few weeks ago had a very strong year last year and produced pretax income of $78 million and did a lot of preparation work for the IPO that we had just completed. And then very significant accomplishment, we gained market share both in the supermarket channel and in the all outlet channel for the second, third and fourth quarters of last year and then also the first quarter of this year. It's a very good performance. In fact, the best market share performance we've had in many, many years.

And here's the market share information. So in any business, gaining market share is a very important objective and it's very true in our business as well. And so the information that you'll see on the chart there reflects really the best market share performance again we've had for quite some time. And so we're pleased with that, and our objective is to continue to gain share, both against our supermarket channel competitors in the United States, as well as in Canada. And then also against all competitors in the all-outlet channel. And I think one of the key reasons why we are gaining market share in part is due to the benefits of our Just for U digital marketing program.

Okay, so now let's focus on 2013 and what our outlook is for there our key growth initiatives. So in our Investor Conference that we held on the 6th of March, we gave financial guidance for this year. And so we've repeated that slide here. So during 2013, our guidance for earnings per share is $2.25 to $2.45. i.e. sales, excluding fuel, we're projecting to be in the range of 2% to 3%. Our operating profit margin, we expect to be flat to up 10 basis points.

In terms of capital spending, we expect this year to spend between $1 billion and $1.1 billion, our capital program and then free cash flow, our guidance for this year is to generate free cash flow of somewhere between $850 million and $950 million.

If you look at our earnings per share growth over the last 3 or 4 years since 2010, you can see in 2010, earnings per share were $1.55. Based on the analyst consensus shown on the right for 2013, the consensus number is $2.32, so if you look at the compound average growth rate over this period, it's about 14% per year. And so a very attractive growth rate and earnings per share, some extent that's reflected in the stock price performance that I showed you earlier. And so it's our objective, the management team to continue to produce attractive earnings growth, as well as attractive returns on cash for our shareholders.

So now for the balance of the presentation, I'd like to focus on 5 key areas: What we're doing in terms of growing sales, what we're doing in terms of margin improvement, how we intend to use our free cash flow and then finish up by a few comments on our Blackhawk business, as well as our property development real-estate business.

So let's first talk about Just for U. Just for U, we believe, is really the state-of-the-art digital marketing program. And through this program, we are connecting with our customers by offering relevant personalized offers, really no one else in the industry is doing. And this program is encouraging our customers, it's driving increased trips, additional spend and market share as well. And it's also a very good mechanism for customers trying new brands, repeat purchases, and at the end of the day, we're expanding consumption within Safeway. So a very good program here.

I indicated earlier we're now live with our Just for U technology in all of our U.S. markets. We have 5.6 million households registered, and we're adding about 20,000 new customers to the program each week. Incremental sales from Just for U users are very strong at about $11 per household per week. And so generating excellent return on investment there. And because the program is now just available in the United States, technology work is underway so that we can have this program for our customers in Canada beginning in the third quarter of this year.

So in summary, we really think this is the best-in-class technology, and we think we have a significant competitive advantage here. We've been spending on this program for a couple of years. We're enhancing the program and adding additional features to the program as we move through time. And so we really believe this is a significant marketing platform for the future that will create benefits for shareholders for quite some time.

Now just 1 slide on our fuel program. We have fuel stations that we own ourselves but we've entered agreements with both Chevron and Exxon to expand our coverage so we can provide additional benefits for our consumers in those areas where we do not physically own gas stations. And so the adoption of this program by our customers is increasing. The weekly spend by customers participating in the program is growing. And that by July of this year, we expect that 94% of our stores will have a nearby fuel site that we can provide incremental benefits for our customers. So a very good program in the fuel area.

Now wellness is a key area for Safeway. We have a very large existing pharmacy business and we're investing to grow that business for we think we have a competitive advantage. We're expanding on a number of health services that we are providing, including counseling for a number of areas, including those that have diabetes or other conditions. We have a very large and growing business for immunizations, and we have great facilities to do that.

We're in the process of simplifying our shopping experience, both in the pharmacy area and family care. And in our new center store remodels, I'll talk about just briefly, we're enhancing the experience there and simplifying what we're doing there to improve our business.

And then our objective is to enhance the role of the pharmacist. Because the pharmacist is one of the most trusted healthcare advisors and so our objective there is to have them closer to customers and to, through their services, improve the loyalty of our existing customers. And then we're also in the process of implementing a strategic initiative in wellness that we think will create benefits for our shareholders over the long term.

I briefly mentioned our center store project. In this area, a number of years ago, we lifestyled the perimeter of our stores but many of our customers think in the center of our stores that were undifferentiated and sometimes it's difficult to shop. And so we view that now as an opportunity. So we embarked on a program now to enhance the center of our stores and create destinations such as living healthy, which is combining our pharmacy and family care areas, meals and ingredients, which is next to our produce and meat areas and then everyday essentials, which focuses on value and other key categories.

One of the objective here is to improve the customer relevance and adjacencies and kind of move just stocking shelves to providing solutions for our customers. And also provide improved accessibility and navigation within the store.

And so based on the results that we are seeing today, we plan to remodel 270 stores. We've had 14 stores completed and we're very excited about the results that we've seen to date. And then of these 270 center store projects, 76 of those stores will also include the re-merchandising of our stores to address the needs of our premium customers.

So in that regard, we've done a lot of research about what our customers expect from their Safeway stores and in many of the areas, particularly those who have higher incomes, higher education and have not been affected by the economy as well, we classify those as premium stores. We believe that we have an excess of 300 premium stores within the company. And so our objective is to upgrade the elements within that store to address these needs such as more organic products, enhance selection, more local products and more products of a global nature. And so this year, we expect to complete about 150 premium re-merchandising remodels within the company to address the needs of these consumers.

One of the strength of Safeway is we have a strong and well-positioned portfolio of Private Label products. You can see the brands listed on the page here. So these products address, for example, in Lucerne dairy products, you can see their organic brand addresses those who have interest in organic products. And then Open Nature has done extremely well because the demand for natural products in the market and those products is actually twice as large as the organic demands as well. And then on the far right, on the third row, is our pantry essentials line, which focuses on budget-conscious shoppers in addressing their needs. So we have a very strong and well-positioned portfolio of our Private Label products.

And particularly in the area of health and wellness, we've done extremely well in terms of our Private Label products. Again, those would include O Organic, Open Nature and then Eating Right as well. And if you look at the total sales of these 3 brands within our Private Label portfolio, total sales were about $750 million in 2012.

Now our objective is to grow our identical store sales in the second half of this year compared to our first-half performance. And the factors listed on the chart will help us achieve that. First is completing the center store projects that I talked about as well, as well as re-merchandising our premium stores. The negative effect of the conversion from branded drugs to generic drugs should significantly decline in the second half, leading to higher ID sales. It's our expectation that retail inflation will accelerate in the second half as well. And then with the continued rollout of our branded fuel program with Chevron and Exxon should add incremental benefits in the second half compared to the first half. And then the final driver of second half performance will be completing our Just for U technology platform in Canada and we're looking for a very positive results in that marketplace.

Now the next couple of slide, let's moved to what we're doing to improve our margins and then also some brief comments on how we're using our free cash flow. On the slide shown on the screen, you can see that in 2012, as I mentioned earlier, profit improvement totaled $351 million. On the right, you can see that our plans for this year have a similar aggressive goal of about $365 million. If you look on the bottom right portion of the chart, you can see that gross enhancing project make up about 75% of that total. It includes a number of things, including improved assortments, improved merchandising, progress on shrink initiatives and a number of other key areas. You can see the other areas of the profit improvement goal include efficiencies in the stores, as well as in our supply chain.

I think that one of the hallmarks of Safeway is our ability to be focused on cost reduction and profit improvement. We've set a plan for the year and then we monitor how that plan is going. And then during the year, we've systematically add projects through the year as new initiatives come available. And so I think this is one of the real strengths of the company.

Free cash flow from 2005 to 2017 as shown on the slide. As I indicated earlier, if you're focused on the middle portion of the chart, our guidance for 2013 is free cash flow of somewhere between $850 million to $950 million. If you move to the right part of the chart, you'll see that in future years, we expect to improve our free cash flow approximately about $100 million a year or a compound average growth rate of about 7%.

Now our priorities for how we're using our cash flow this year are first, the dividend and we're pleased again to announce that the Board approved the increase in the quarterly dividend from $0.175 to $0.20, or an increase of $0.14 per share on a quarterly basis. And then, primarily the rest of our free cash flow will be used to reduce debt.

You can see that reduction of debt has been a priority for a number of years, beginning in 2002, you can see that we had total debt of about $8.4 billion that was reduced to $5.6 billion last year. And then this year, based on our priorities for how we use our cash, we expect to reduce debt by approximately $900 million based on the free cash flow that we'll have available.

This chart represents, I think, one of the real significant competitive advantages of our company. On the red line is our projected cumulative free cash flow over the next 5 years. You can see on the right-hand portion of the screen over this time period, we expect to generate $5.7 billion of free cash flow.

On the purple line represents our cumulative schedule debt repayments over the same timeframe. As we can see on the right, that totals $3.1 billion. So over this time period, by the end of the 5-year period, free cash flow will exceed -- we expect free cash flow will exceed debt payments by $2.6 billion. And that represents approximately 43% of our current market capitalization. So one of the significant strengths of this business is our ability to generate free cash flow.

Now let's briefly, just a couple of comments about 2 of our businesses, Blackhawk and then our real-estate development business. Blackhawk has been a real success story. It's a leading company for offering prepaid gift cards, prepaid telecom cards, a financial services products. And you can see what we graphed on the slide here is the increase in load value or the amount that's loaded on the cards that we sell around the world. You can see in 2006, the load value of Blackhawks products were $1.5 billion. In 2012, that had increased to $8.5 billion, were loaded on cards of Blackhawk supplies, both in our Safeway stores but throughout many, many locations. So it's a compound growth rate of 33%. You can see that in 2012, that growth rate was 23%. So a tremendous success there.

You'll the financial results for Blackhawk. In 2012, operating revenues were close to $1 billion. Revenues less commission paid $448 million. Pretax income, as I mentioned earlier, about $78 million and then EBITDA -- adjusted EBITDA of about $100 million. And on the right-hand portion of the screen, you can see the tremendous growth rates that Blackhawk is enjoying and a real success story.

So based on the success that we've had in the Blackhawk business, just about a month ago, 11.5 million shares of stock were sold at about $23 a share. The proceeds to Safeway were about $265 million and $155 million after taxes and expenses.

And so based on that market capitalization, Safeway retains an ownership of about 73% of the business. And so based on the current market price of the stock, which is trading on NASDAQ under the symbol HAK, the implied equity value of Blackhawk is approximately $1.3 billion. So a very good success story here for the Blackhawk business.

And the last business I'll talk about briefly is our property development business or PDC. The focus here is to develop retail shopping centers with Safeway as the anchor tenant and our investments are concentrated in our primarily urban and suburban markets, got a very good track record, and earnings last year were about $41 million.

And the objective here is to capture the profits that we've let developers historically earn as a result of Safeway being the anchored tenant. And so here, we are building space next to adjacent to our stores, leasing that space up, establishing a rental stream for those properties and then monetizing those values. And this business is doing very well.

So now just in terms of summary, I'll conclude with a final slide. Our objectives for 2013 are to accelerate our top line sales growth, continue to gain market share, both in the supermarket channel, as well as in the all-outlet channel, to continue to grow our operating profit margin and then finally, to continue to produce free cash flow. And then by doing so, to continue to create value for our shareholders.

So I think that concludes our formal remarks. And so I think we'll entertain questions or to follow Steve's lead in the past, we'll entertain compliments as well. Any questions? Yes?

Question-and-Answer Session

Unknown Shareholder

I'm actually here with a compliment. First of all, congratulations on the new position and, Mr. Burd, congratulations on your retirement. My name is Christy Middleton and I'm here with the Humane Society of the United States and we're shareholders. We've worked for many years with Safeway, Brian Dowling has been a wonderful partner. And we just want to say that we're grateful for the work that the company continues to do on improving animal welfare within its supply chain. It's been a real leader and I don't think that it wants to phase out gestation crates and increase the number of cage-free eggs. We know these decisions don't occur in a vacuum and it requires a lot of work. So thanks to everyone for being here and I think that you all deserve a round of applause, so please join me.

Robert L. Edwards

Thank you very much. I think our people are very responsive to these issues, and the issues that our consumers care about, we care about. So thank you very much. Any questions or compliments? They're all pretty good.

Unknown Shareholder

I wish you a lot of success in your future and your new job. My name is Fritz Kyle, [ph] I'm a stockholder. I have a question regarding your supply chain. And in going through some K-10 repots, I came across some of your supply base that claims that they were instructed to pay brokerage to third parties. And this function was discontinued at the end of 2010 and then it's placed, they claim that there was a new program put into effect for brokerage would be paid directly to Safeway. Is this a normal thing that happens in Safeway's supply chain? Or they collect the brokerage on their purchases from their private-branded suppliers?

Robert L. Edwards

I'm not familiar with the specific issue you're talking about. I'm aware that our supply chain people are focused on reducing and minimizing our transportation expense. In fact, if you look over the last 3 or 4 years, and it's reflected in the profit improvement slides I showed earlier, supply chain has been a major contributor to lowering costs and I'm not specifically familiar with the issue that you're addressing. But I know generally there is a program of trying to be efficient with our transportation fleet and minimize our transportation costs. In fact, also for some of our major CPG vendors, we work with them to separate some of those charges relevancy if we can apply our expertise to lowering their transportation costs, which again, directly come to us as costs. So we have very good people in this regard and I think have done quite a good job in reducing our expenses in the supply chain. Thank you. Thanks for owning the stock.

Unknown Shareholder

Robert, [indiscernible] I'm a fellow shareholder. Just have a question. I just tried your Open Nature grass-fed beef, and I'm wondering if it's available elsewhere in Safeway? And if there's anything new on the horizon for Open Nature?

Robert L. Edwards

Thanks for the question. We are very pleased with our Open Nature beef product. Yes, as I mentioned earlier, the demand for natural products is twice that of organic products. And so in the Open Nature line, we're carrying these meat products available in about hundred stores here in Northern California and a similar number of stores in the Northwest area, in Oregon and Washington. And we're seeing excellent results so far as we have a very good demand for these products. Very good, very lean product. In fact, our home on Sunday, we had Open Nature beef, and we're quite pleased with it. So for those of you in the audience who haven't tried it, we'd encourage you to do so but it's a very good product. It's very innovative work by our marketing and consumer-brand teams on Open Nature. It's been a real success story. And to the -- your second part of the question, we're expanding the number of items within Open Nature because of the customer receptivity to what we're doing and we're very optimistic about the continued demand for our Open Nature products. Yes, please?

Unknown Shareholder

Thank you, Mr. Chairman and congratulations. My name is Mike Shellford [ph] and I'm from near Des Moines, Iowa and I'm here on behalf of the nation's pig farmers and the National Pork Producers Council, which is a stockholder. I guess, first of all, we want to thank the staff and the management and the Board of Directors for Safeway for their continued efforts in supporting our family pork producers through your strong marketing efforts, which you, obviously, do very, very well. Specifically, we'd like to thank Jim Sheeran, Vice President of Meat and Seafood and also Brian Dowling, Vice President of Communications and Public Affairs for their ongoing communications. For many years, our organization has worked with Safeway on pork products promotions across the country, and we sincerely appreciate your continued communication, cooperation and support. I do want all the shareholders to know that the nation's family pig farmers have made many improvements in animal care and production practices, and like Safeway, they are committed to continuous improvement. I hope everyone will join me in thanking you, the Board, the staff for your ongoing continued efforts.

Robert L. Edwards

Thank you very much. We appreciate it. Thanks for coming all the way out from Iowa.

Unknown Shareholder

First of all, congratulations. My name is Helen Arroyo, [ph] I'm a shareholder. My question is, I heard about Fast Forward, and it increases your gas rewards at the pump. How does that work?

Robert L. Edwards

We have been working for a number of years on a payments technology that provides efficiencies for the company. And to encourage use by our consumers, we're doubling the gas rewards in one test market. We're enhancing the technology here that we can use this technology throughout the entire system of stores that we have. And then we also have long-term aspirations to make this technology available to key partners who have expressed interest in this. And so it's just part of the innovation philosophy that Steve has established at this company. I think sometimes when people think about innovation, they think more of Silicon Valley or high-tech companies and companies in the grocery space generally are not thought about as being that innovative but it is actually not true. I mean in this business, you have to be innovative to be successful. And so part of the culture at Safeway is to be always looking for ways that we can improve how we do things and look at things differently. And if we have a best practice in one location to see what we can do about replicating that process in 1,700 locations around the company, it's the magic of retail. And so Fast Forward is a very innovative technology that we've developed. We have high aspirations for the benefits that it will provide for the company, as well as benefits for our customers. Thank you. Other questions?

Unknown Shareholder

Congrats, Robert, of a new assignment. My name is Nick Brillo. [ph] I'm a fellow shareholder. I noticed that Safeway does a lot in our communities and was curious about what you're involved in and why you choose to make these charitable contributions?

Robert L. Edwards

There are lots of attribute to define the Safeway brand, but giving back is a key part of the Safeway brand. As you think about the food products we donate, food banks, which I think last year was approximately $120 million. We also donate money to schools, that's probably in the order of $15 million to $20 million. And then we have a number of campaigns to collect contributions to others for prostate cancer research, for breast cancer research, for muscular dystrophies and those who have disabilities, veterans, as well, and so we have a number of campaigns going on. And in total, those campaigns probably raise about $40 million a year. And so if you add up to those numbers, I think last year, approximately $180 million, the company either raised or contributed to charitable causes. So one of the key attributes for Safeway is giving back to those around us. Thank you. Other comments or questions?

Okay. Having none, thank you very much, appreciate your support. Thanks for owning the stock.

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