Safeway posts 1.9% H1 increase - Food Retailing - Safeway PLC

Eurofood, Nov 7, 2002

UK food retailer Safeway has completed a "solid first half" although its second quarter performance was characterised by slower sales. Safeway reported second quarter like-for-like sales growth of 1.1%, although the supermarket generated stronger sales from its reformatted stores.

For the first half like-for-like sales grew by 1.9% and total sales, adjusting for Easter, were up by 2.2%. The results were in line with analysts' expectations.

The retailer reported steady progress with the roll out of 40 new store formats and a good customer response to new product launches. Four second-generation mega-stores were also launched.

Safeway's emphasis now lies with increasing the average customer spend by continuing the roll out of the new store formats and further improvements to its product ranges. Incremental investment in the second quarter, the company said, has therefore been directed towards achieving higher, more profitable customer spend, rather than additional new customer numbers.

Carlos Criado-Perez, Safeway chief executive, commented, "The second phase of our strategy is well on track, despite the challenges of an increasingly competitive market. Over a third of our selling area has now been reformatted and by the end of this year, almost half will have been completed. Despite carrying the costs and short term disruption of store reformatting, we have continued to make profit progress by focusing on good margin management and cost control and we look forward to delivering solid interim results in November."

In the light of increasingly stiff competition from the other major UK food retailers Asda, Sainsbury's and Tesco some analysts considered the results to be below par.

However, Safeway finance director Simon Laffin dismissed concerns about slowing sales and level recovery, stating the first half was satisfactory and the company is still managing to deliver what it set out to do. He also added, that the company's performance should be judged as the as part of the company's long term strategy and that strong results could not be expected immediately.