US retailer Safeway Inc has booked a drop in full-year profits due to lower sales during 2011.

Net profit slid 12.4% to US$516.7m. The decline was due to a 2.6% fall in operating profit to $1.13bn as sales decreased. Sales slid 6.3% to $43.63bn.

Safeway's earnings were also hit by a $98.9m tax charge from a Canadian dividend paid in the first half of 2011.

In the fourth quarter, profits also fell but sales were up year-on-year. Net profit slumped 6.1% to $215.6m, while operating profit amounted to $390.1m, a 6.5% decline on the prior-year period. Sales, however, climbed 6.2% to $13.6bn after a 1.5% increase in identical-store sales, excluding fuel.

The fall in annual and quarterly profits led Safeway's shares to drop 7.26% to $21.03 at 14:05 ET.

"Our business continued to grow," said Safeway chairman, president and CEO Steve Burd. "With ID sales growth remaining steady and costs well-controlled, we increased earnings per share 8%. As we move into 2012, our personalised marketing efforts and innovation in private label brands should contribute to our growth."

The company will report its forecasts for 2012 on 5 March when it holds its annual investor conference.