Safeway Beats Estimates, Disappoints With Lower Guidance

|
 |  Includes: KR, SVU, SWY, WMT
by: Wall St. Cheat Sheet

Safeway (NYSE:SWY) is one of the largest grocery chains in the US. The grocery giant beat Wall Street’s expectations for the third quarter, but offered disappointing guidance for the year.

Here’s your earnings Cheat Sheet:

Earnings: Decreased 4.6% to $122.8 million ($0.33 cents a diluted share) from $128.8 million ($0.31 cents a diluted share) last year.

Revenues: Declined to $9.4 billion from $9.5 billion last year.

Actual Versus Wall Street Expectations: Analysts expected earnings of 31 cents a share.

Notable Stats: Gross profit declined 13 basis points to 28.14% of sales versus 28.27% Q3 last year. (Excluding the 13 basis point impact from fuel sales, gross profit margin was flat.)

Interest expense declined to $69.4 million in Q3 2010 from $78.3 million in Q3 2009 due to lower average interest rates and lower average borrowings.

Guidance: For the year, earnings per diluted share and non-fuel ID sales are expected to be toward the lower end of guidance of $1.50 to $1.70 and -1.0% to -1.5%, respectively. The company expects cash capital expenditures of approximately $900 million and free cash flow in the middle of the range of $0.9 to $1.1 billion.

Key Quotes: “The trend in price per item improved during the quarter. We expect this trend to continue as we anniversary the price investments we made in the second half of 2009,” said Steve Burd, Safeway Chairman, President and CEO.

Key Competitors to Watch: Kroger (NYSE:KR), SuperValu (NYSE:SVU), and Wal-Mart (NYSE:WMT).

Technicals: Shares of Safeway are testing their 200 DMA, and recently saw nice support at the 50 DMA.

Click to enlarge

Official Company Earnings Release here.

Disclosure: No positions in SWY.