PLEASANTON -- Safeway's net income jumped 13 percent in the final three months of 2012, reaffirming the prowess of the nation's second-largest supermarket chain despite tough competition from big-box grocers like Walmart and the popularity of niche stores like Trader Joe's.
The company credited the growing popularity of its customer loyalty program, "Just for U," for the gains. The program, which has about 5.4 million cardholders, offers digital coupons and individualized deals based on a consumer's past purchases.
After adjusting for benefits from a legal settlement, Safeway's profit for the quarter ending Dec. 29 was 94 cents a share, compared with 67 cents a share in the same quarter the year before. The results handily beat Wall Street's forecast, which called for profit of 76 cents a share. Investors celebrated, driving shares up almost 15 percent after Safeway CEO Steve Burd's morning call with investors.
The Pleasanton-based company, which includes Safeway, Vons, Dominick's and other chains in the U.S. and Canada, saw fourth-quarter sales increase 1.2 percent to $13.8 billion. The boost came in part from higher gift- and prepaid-card sales, and Safeway also shed some costs when it closed its Genuardi's stores in the Northeast.
Net income for 2012 increased more than 15 percent from the year before, from about $517 million to $597 million.
Thursday's earnings announcement was the first since Burd, 63, announced his retirement last month. He will leave the company in May after two decades at the helm. It was also the first earnings call with Safeway's new chief financial officer, Peter Bocian, who replaced now-President Robert Edwards on Tuesday.
Burd said the strong gains Safeway has posted for the past three quarters will continue after his departure. Company executives said the start of 2013 has been profitable and gains will continue as Safeway grows Just for U, which is gaining about 50,000 customers a week.
With the popularity of Just for U digital coupons, which customers can receive on their iPad and smartphone, Burd said Safeway may soon do away with the old paper coupons. The discounts knock 10 percent to 20 percent off club card prices.
"Our best customers have become increasingly more loyal and buying more items per trip," Burd said. "That's been true now since the beginning of Just for U."
Said Burd: "We are feeling very good about 2013."
Contact Heather Somerville at 925-977-8418. Follow her at Twitter.com/heathersomervil.