US grocer Safeway has reported lower third-quarter net income and said it plans to revitalise its Texas unit.

The company posted net income of US$122.5m, or 27 cents per share, for the third quarter to 10 September 2005, compared to net income of $159.2m, or 35 cents per share for the third quarter of 2004.

Safeway's results were reduced 8 cents per share due to an impairment charge in Texas 3 cents per share for an employee buyout charge in Northern California. The favourable resolution of various tax issues increased net income by 6 cents per share in the third quarter of 2005 and 7 cents in 2004.

Sales and other revenue increased 7.2% to $8.9bn in the third quarter of 2005, driven by increased fuel sales, Safeway's marketing strategy and Lifestyle store execution.

Comparable store sales increased 5.7% and identical store sales (which exclude replacement stores) increased 5.4% for the third quarter of 2005. Excluding the effect of fuel sales, identical store sales increased 3.4%.

"We are pleased with the progress we made this quarter on several fronts," said Steve Burd, chairman, president and CEO. "Our identical store sales are the strongest they have been in over four years, we gained US market share in 35 of the last 36 weeks, operating and administrative expense as a percentage of sales declined significantly in the quarter, and our capital investments and Lifestyle stores continue to exceed expectations."

Safeway said it plans to revitalise the Texas division through a strategy which includes the closure of 26 under-performing stores, a focused Lifestyle remodel program and the introduction of proprietary products.