Safeway Inc. today reported net income of $280.9 million ($0.55 per share) for the second quarter ended June 17, 2000, compared to $236.4 million ($0.46 per share) for the second quarter of 1999.

This represents a 20% increase in earnings per share.

Second-quarter 2000 comparable-store sales increased 4.9%, while identical-store sales (which exclude replacement stores) rose 4.4%. Total sales increased 17% to $7.4 billion from $6.3 billion in the second quarter of 1999 primarily due to strong store operations and the Randall's acquisition described below.

Gross profit increased 13 basis points to 29.68% of sales in the second quarter of 2000 from pro forma gross profit of 29.55% in the second quarter of 1999 due primarily to continuing improvements in buying practices and product mix. Operating and administrative expense, including goodwill amortization, declined 65 basis points to 21.82% of sales in the second quarter of 2000 compared to pro forma operating and administrative expense of 22.47% in the second quarter of 1999, reflecting increased sales and ongoing efforts to reduce or control expenses. This is the 29th consecutive quarter of improvements in the operating and administrative expense ratio, after pro forma adjustments for acquisitions.

Interest expense increased to $108.3 million in the second quarter of 2000 from $74.2 million in the second 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 6.9 over the last four quarters. Operating cash flow as a percentage of sales was 10.47% for the quarter and 9.66% over the last four quarters, both all-time highs.

Equity in earnings of Casa Ley, Safeway's unconsolidated affiliate, was $3.4 million for the quarter compared to $5.2 million in 1999. Casa Ley operates 91 food and general merchandise stores in western Mexico. Safeway has owned 49% of Casa Ley since 1981.

"We are extremely pleased with our second-quarter performance," said Steven A. Burd, Safeway chairman, president and CEO. "Our efforts to build sales are clearly producing strong results."

Sales for the first 24 weeks of 2000 were $14.5 billion compared to sales of $12.5 billion in the first 24 weeks of 1999. The gross profit margin increased 21 basis points to 29.72% of sales in 2000 from a pro forma gross profit margin of 29.51% in 1999. Operating and administrative expense, including goodwill amortization, improved 51 basis points to 22.16% of sales in 2000 from pro forma expense of 22.67% in 1999.

During the first two quarters of 2000, Safeway invested approximately $471 million in capital expenditures. The company opened 25 new stores and closed 19 stores. For the year, the company expects to spend more than $1.7 billion while opening 75 to 80 new stores and completing approximately 275 remodels.

As previously announced, Safeway acquired Randall's in September 1999 and Carrs in April 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 Randall's and Carrs 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 1,665 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 second quarter results will be broadcast live over the internet at 8 a.m. PDT today at http://investor.safeway.com. An on-demand webcast of the conference call replay will also be available from 11 a.m. PDT on July 6th through July 13th.

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 24 Weeks Ended
June 17, June 19, June 17, June 19,
2000 1999 2000 1999
-------- -------- -------- --------

Sales $ 7,418.1 $ 6,337.0 $ 14,504.4 $ 12,450.2
======== ======== ======== ========

Gross profit $ 2,201.7 $ 1,895.0 $ 4,311.4 $ 3,716.6

Operating and
administrative
expense (1,589.6) (1,404.4) (3,155.3) (2,780.8)

Goodwill
amortization (29.2) (21.0) (58.3) (41.0)
-------- -------- -------- --------

Operating profit 582.9 469.6 1,097.8 894.8

Interest expense (108.3) (74.2) (218.1) (147.5)

Equity in earnings
of unconsolidated
affiliate 3.4 5.2 10.5 13.2

Other income, net 2.1 0.8 3.4 2.0
-------- -------- -------- --------

Income before
income taxes 480.1 401.4 893.6 762.5

Income taxes (199.2) (165.0) (370.8) (320.3)
-------- -------- -------- --------

Net income $ 280.9 $ 236.4 $ 522.8 $ 442.2
======== ======== ======== ========

Diluted earnings
per share $ 0.55 $ 0.46 $ 1.03 $ 0.86
======== ======== ======== ========

Weighted average
shares outstanding
- diluted
(in millions) 510.5 513.0 509.2 512.9
======== ======== ======== ========


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

12 Weeks Ended 24 Weeks Ended
June 17, June 19, June 17, June 19,
2000 1999 2000 1999
-------- -------- -------- --------
Operating cash flow:

Net income $ 280.9 $ 236.4 $ 522.8 $ 442.2
Add (subtract):
Income taxes 199.2 165.0 370.8 320.3
Interest expense 108.3 74.2 218.1 147.5
Depreciation 160.9 127.4 321.5 251.3
Goodwill
amortization 29.2 21.0 58.3 41.0
LIFO expense 1.3 2.3 1.3 4.6
Equity in
earnings of
unconsolidated
affiliate (3.4) (5.2) (10.5) (13.2)
-------- -------- -------- --------

Total operating
cash flow $ 776.4 $ 621.1 $ 1,482.3 $ 1,193.7
======== ======== ======== ========

As a percent
of sales 10.47% 9.80% 10.22% 9.59%
As a multiple
of interest
expense 7.17 x 8.37 x 6.80 x 8.09 x