Safeway Inc. today reported net income of $270.0 million ($0.53 per share) for the third quarter ended September 9, 2000 compared to $223.4 million ($0.44 per share) for the third quarter of 1999. This represents a 20% increase in earnings per share.

Third-quarter 2000 comparable-store sales increased 4.9%, while identical-store sales (which exclude replacement stores) rose 4.2%. Total sales increased 15% to $7.5 billion from $6.5 billion in the third quarter of 1999 primarily due to strong store operations and the Randall's acquisition described below.

Gross profit increased 62 basis points to 29.99% of sales in the third quarter of 2000 from pro forma gross profit of 29.37% in the third quarter of 1999 due primarily to continuing improvements in buying practices and product mix. Operating and administrative expense, including goodwill amortization, declined 18 basis points to 22.55% of sales in the third quarter of 2000 compared to pro forma operating and administrative expense of 22.73% in the third quarter of 1999, reflecting increased sales and ongoing efforts to reduce or control expenses. This is the 30th consecutive quarter of improvements in the operating and administrative expense ratio, after pro forma adjustments for acquisitions.

Interest expense increased to $104.1 million in the third quarter of 2000 from $73.4 million in the third quarter of 1999. This increase is primarily due to debt incurred to finance the Randall's acquisition and the repurchase of Safeway stock during the fourth quarter of 1999 and, to a lesser extent, higher interest rates on variable rate borrowings. Despite the increase in interest expense, the interest coverage ratio (operating cash flow divided by interest expense) remains very strong at 7.2 times for the quarter and 6.7 over the last four quarters. Operating cash flow as a percentage of sales was 10.02% for the quarter and an all-time high of 9.80% for the last four quarters.

Equity in earnings of Casa Ley, Safeway's unconsolidated affiliate, was $7.5 million for the quarter compared to $6.4 million in 1999. Casa Ley operates 94 food and general merchandise stores in western Mexico. Safeway has owned 49% of Casa Ley since 1981.

Sales for the first 36 weeks of 2000 were $22.0 billion compared to sales of $18.9 billion in 1999. The gross profit margin increased 36 basis points to 29.82% of sales for the first 36 weeks of 2000 from a pro forma gross profit margin of 29.46% in 1999. Operating and administrative expense, including goodwill amortization, improved 40 basis points to 22.29% of sales in 2000 from pro forma expense of 22.69% in 1999.

During the first three quarters of 2000, Safeway invested approximately $888 million in capital expenditures. The company opened 45 new stores and closed 24 stores. For the year, the company expects to spend more than $1.7 billion in 2000 while opening 75 to 80 new stores and completing approximately 275 remodels.

As previously announced, Safeway acquired Carrs in April 1999 and Randall's in September 1999. In order to facilitate an understanding of Safeway's operations, the pro forma amounts presented in this announcement were computed as if Safeway had acquired Carrs and Randall's at the beginning of 1999.

Safeway Inc. is a Fortune 50 company and one of the largest food and drug retailers in North America based on sales. The company operates 1,680 stores in the United States and Canada and had annual sales of $28.9 billion in 1999. The company's common stock is traded on the New York Stock Exchange under the symbol SWY.

Safeway's investor conference call discussing third quarter results will be broadcast live over the internet at 8:00 AM PST today at http://investor.safeway.com. An on-demand webcast of the conference call replay will also be available from 11:00 AM PST on September 28 th through 5:00 PM PST on October 5th.

This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. Such statements relate to, among other things, capital expenditures, operating improvements, and cost reduction and are indicated by words or phrases such as "continuing," "on-going," "expects," and similar words or phases. These statements are based on Safeway's current plans and expectations and involve risks and uncertainties that could cause actual events and results to vary significantly from those included in or contemplated by such statements. Please refer to Safeway's reports and filings with the Securities and Exchange Commission for a further discussion of these risks and uncertainties.


                     SAFEWAY INC. AND SUBSIDIARIES
OPERATING RESULTS
(Dollars in millions, except per-share amounts)
(Unaudited)

12 Weeks Ended 36 Weeks Ended
--------------------------- --------------------------
September 9, September 11, September 9, September 11,
2000 1999 2000 1999
------------ ------------- ------------ -------------

Sales $ 7,457.2 $ 6,475.0 $ 21,961.5 $ 18,925.2

Gross profit $ 2,236.7 $ 1,918.8 $ 6,548.1 $ 5,635.4

Operating and
administrative
expense (1,652.7) (1,444.0) (4,808.0) (4,224.8)

Goodwill
amortization (29.1) (21.5) (87.4) (62.6)
--------- --------- --------- ---------
Operating
profit 554.9 453.3 1,652.7 1,348.0

Interest
expense (104.1) (73.4) (322.2) (221.0)

Equity in
earnings of
unconsolidated
affiliate 7.5 6.4 18.0 19.6

Other income
(expense), net 3.3 (1.1) 6.7 1.1
--------- --------- --------- ---------
Income before
income taxes 461.6 385.2 1,355.2 1,147.7

Income taxes (191.6) (161.8) (562.4) (482.0)
--------- --------- --------- ---------
Net income $ 270.0 $ 223.4 $ 792.8 $ 665.7
--------- --------- --------- ---------
Diluted earnings
per share $ 0.53 $ 0.44 $ 1.55 $ 1.30
--------- --------- --------- ---------
Weighted average
shares
outstanding -
diluted
(in millions) 511.7 513.4 510.0 513.1
--------- --------- --------- ---------

SAFEWAY INC. AND SUBSIDIARIES
OPERATING RESULTS
(Dollars in millions)
(Unaudited)

12 Weeks Ended 36 Weeks Ended
--------------------------- --------------------------
September 9, September 11, September 9, September 11,
Operating
cash flow: 2000 1999 2000 1999
------------ ------------- ------------ -------------


Net income $ 270.0 $ 223.4 $ 792.8 $ 665.7
Add (subtract):
Income taxes 191.6 161.8 562.4 482.0
Interest expense 104.1 73.4 322.2 221.0
Depreciation 157.7 133.5 479.2 384.8
Goodwill
amortization 29.1 21.5 87.4 62.6
LIFO expense 2.3 2.3 3.6 6.9
Equity in
earnings of
unconsolidated
affiliate (7.5) (6.4) (18.0) (19.6)
--------- --------- --------- ---------
Total operating
cash flow $ 747.3 $ 609.5 $ 2,229.6 $ 1,803.4
--------- --------- --------- ---------
As a percent
of sales 10.02% 9.41% 10.15% 9.53%
As a multiple
of interest
expense 7.2 x 8.3 x 6.9 x 8.2 x