A "sluggish" US economy and falling food produces has hit sales and earnings at US retail giant Safeway - but failed to dent the company's shares.

The company said today (15 October) that third-quarter net earnings had tumbled by more than 35% to US$128.8m during the the three months to the end of September.

Revenue dropped 7% to $9.5bn thanks in part to lower fuel sales although same-store sales fell 3%.

"Safeway's sales remained soft, driven largely by deflation in dairy, produce and meat, and a sluggish economy," said chairman, president and CEO Steve Burd.

"However, we are encouraged that our household and transaction counts increased in the quarter, and that volume trends continue to improve."

Safeway's shares were up 4.9% at $22.49 at 12:37 ET today.