Tom Thumb's owner sees momentum after store closings

12:00 AM CST on Friday, February 24, 2006

By MARIA HALKIAS / The Dallas Morning News

Safeway Inc. said Thursday that it's turning the corner in Texas.

Last year, the chain closed 26 stores in the state, including nine in Dallas-Fort Worth, and remodeled other locations under its new "lifestyle" format, which adds features of specialty food stores.

"The news is good in Texas," Safeway chief executive Steve Burd told analysts during a conference call Thursday, when the chain reported fourth-quarter results.

The state's Tom Thumb and Randalls stores "beat by a country mile" their operating plans in the quarter, Mr. Burd said. "That would suggest some strong, building momentum in the Texas markets."

The No. 3 U.S. grocery chain reported lower quarterly results Thursday, partly due to a pre-tax charge of $55 million associated with the Texas store closings. But it was mostly upbeat about its prospects overall and in Texas.

Safeway earned $173.5 million, or 39 cents per share, for the three months ended in December.

That compared with net income of $202.7 million, or 45 cents, the previous year.

Excluding one-time items such as costs for employee buyouts in Northern California and at its Dominick's chain in Chicago, the company earned $230.6 million, or 51 cents a share.

That was above analysts' average forecast of 47 cents, according to Thomson Financial.

Nine out of 10 divisions, including Texas, had positive results in the quarter.

Sales totaled $12 billion, higher than the Wall Street forecast of $11.9 billion, and up 5.8 percent from $11.4 billion in 2004.

Last year, Safeway made $1.4 billion in capital expenditures, opening 21 lifestyle stores and remodeling 293 in the new format. It closed 48 stores overall.

In 2006, the company expects to make $1.6 billion in cash capital expenditures, opening 20 to 25 lifestyle stores and completing about 280 lifestyle remodelings.

Texas will get a share of that spending, a spokesman said.

Safeway shares climbed $1.10, or 4.7 percent, to $24.35.

E-mail mhalkias@dallasnews.com