US retailer Safeway Inc has insisted it is performing ahead of the market, despite posting a fall in third-quarter operating profit.
The company booked a 12.1% drop in operating profit yesterday (11 October), as it battled weak consumer sentiment in the US and Canada. Total sales were down 0.2%, while same-store sales excluding fuel edged up 0.1%, Safeway revealed.
However, speaking on a conference call with analysts, CEO Steve Burd revealed the supermarket operator had been able to grow volumes during the three months thanks to its investments in price, promotions and its Just for U loyalty programme.
“Our US volume was significantly better than rest of market inside the food channel,” he said. “Our US food channel market share improved for the third consecutive quarter, finishing at a positive 0.4. Now that’s measuring on volume.”
Looking at Safeway’s performance in the current quarter, Burd added volumes had “continued to improve”.
“The US divisions, which… are all supported by our just for U platform, are currently running at 1.4%, and total company sales are currently at 1%,” he revealed.
According to BB&T Capital Markets analyst Andrew Wolf, the pick-up in fourth-quarter sales suggests market share gains are “to continue”.
“We anticipate that ID sales trends should improve as just for U continues to mature. Same store sales are currently running up 1.4% in the US, where Just for U has been fully rolled out,” Wolf observed.
According to Burd, Just for U has 4.5m registered shoppers, 25% of whom are considered “regular users”. The percentage of people going “from non-regular to regular continues to grow,” he added.
Burd said the Just for U programme was driving sales gains and, while Safeway management anticipates competitors will follow suit and introduce similar loyalty schemes, he expects to be able to build on the competitive advantage that Just for U has provided.
“I would expect that over time, that others will try to do something similar. But I would also expect that we would have a substantial lead, and we would have it for a long time because if you want to think of just for U today as just for U 2.0, then we have already on the chalkboard, have 3, 4 and 5,” he said.
However, Barclays Capital analyst Erica Chase was less convinced by the results that Safeway has had from Just for U, emphasising that same-store sales failed to hit expectations.
“ID sales were well below expectations despite the full rollout of the company’s Just for U program. Although volume improved during the quarter, it appears much slower than expectations,” Chase wrote in a note to investors.