US supermarket chain Safeway Inc today (22 July) posted a 40% fall in second-quarter profits and cut its earnings guidance for the full year.

The retailer saw net income drop from $238.6m in the second quarter of 2009 to $141.3m in 2010.

The figures in the second quarter of 2009 included a tax benefit of $57.8m but the drop in earnings in the second quarter of this year led Safeway to lower its target for annual profits.

Safeway said it now sees earnings per diluted share reaching $1.50 to $1.70, down from an earlier target of $1.65 to $1.85.

Sales reached US$9.5bn in the second quarter, essentially flat on the same quarter last year.

Higher fuel sales and a stronger Canadian exchange rate were largely offset by a 2.5% decline in identical-store sales.

Safeway also cut its target for identical-store sales, excluding fuel, from 0-1% growth to a fall of 1-1.5%.

Chairman, president and CEO Steve Burd said the results were "in line with our expectations" and that the company as encouraged by volume trends in the quarter.