Earnings Preview: Safeway to report 3Q Thursday

PORTLAND, Ore. — Grocery chain Safeway Inc. reports its third-quarter results on Thursday. The following is a summary of key developments related to the period.

OVERVIEW: Safeway, like many grocers, has seen changes in consumer shopping habits take a toll on its bottom line for several quarters.

The Pleasanton, Calif.-based company previously lowered its full-year outlook due to the weak environment, as shoppers cut spending — even on food — down to the most essential items.

However, Safeway was much later than its competitors to cut prices in stores and lost some of its base. In the highly competitive food landscape, it’s unclear if shoppers will have embraced that change yet.

BY THE NUMBERS: Analysts surveyed by Thomson Reuters expect the company to earn 30 cents per share on revenue of $9.5 billion for the quarter.

ANALYST TAKE: JPMorgan analyst Charles Grom said in a note to investors that Safeway has invested in improving its perception among shoppers when it comes to price but said that such efforts can take time and be “lumpy” along the way, making third-quarter estimates risky.

He also added that the company and Wall Street’s full-year estimates may be overly enthusiastic, given a tax benefit in 2009 fiscal year and assumption of significant growth. Grom said management should address that issue soon, although it may not until the fourth-quarter.

Jefferies & Company Inc. analyst Scott Mushkin lowered third-quarter estimates to 26 cents per share, down from 33 cents per share on the impact of increased competition and lower food prices.

While the company will likely remain under performance pressure, Mushkin maintained a “buy” rating, saying the market has already priced in a “worst-case scenario” impact on Safeway’s shares.

STOCK PERFORMANCE: Safeway shares fell roughly 6 percent during the quarter. Shares of Safeway have fallen 3.75 percent in the past 52 weeks.