Safeway Profit Surges On Gains, Considering Possible Sale

(RTTNews) - Safeway Inc. (SWY) on Wednesday reported a surge in profit for the fourth quarter from a year ago, reflecting a hefty $3 billion gain on disposal of its Canadian operations. The supermarket chain also revealed it is in discussions for a possible sale of the company.

Pleasanton, California-based Safeway, in a statement, said that although discussions are going on, it has not reached any deal and there can be no assurance that it will reach an agreement. The company, however, did not disclose the name of potential buyers.

The company also revealed plans to distribute the remaining 37.8 million shares it owns of Blackhawk Network Holdings to Safeway stockholders, and also explore alternatives to monetize its 49 percent stake in Mexican retailer Casa Ley S.A.

Lately, Safeway has been divesting its business and simplifying it operations as it struggles to improve sales amidst weak economy and fierce competition from other big retailers.

Recently, the company exited from the Chicago market by selling off 72 Dominick's stores in the region. The Chicago exit was on the back of previous strategic initiatives taken by the grocer including the sale of its Canadian division and spin-off of Blackhawk, its prepaid gift cards and payment service business.

For the fourth quarter, Safeway reported a profit of $3.31 billion or $13.46 per share, up from $244.0 million or $1.02 per share last year.

The quarter's bottom line mainly reflects an income from discontinued operations of $3.23 billion, related mainly to gain from the sale of Canadian operations.

Excluding items, adjusted earnings for the quarter were $0.53 per share compared to $0.59 per share last year.

On average, 12 analysts polled by Thomson Reuters expected earnings of $0.48 per share for the quarter. Analysts' estimates typically exclude special items.

Sales and other revenues for the quarter edged up to $11.31 billion from $11.22 billion last year.

Eleven analysts had a consensus revenue estimate of $11.48 billion for the fourth quarter.

Gross margin for the quarter improved to 26.52 percent from 26.32 percent last year.

Looking forward to the full year, Safeway expects adjusted earnings in the range of $1.15 to $1.35 per share.

Analysts currently expect earnings of $1.69 per share for the full year 2014.

SWY closed Wednesday's trading at $34.61, up $0.51 or 1.50%, on the NYSE. The stock further gained $0.99 or 2.86% in after-hours trade.