US grocery retailer Safeway has reported a fall in third-quarter net income, as its operations continued to be impacted by the strike in Southern California that ended in the first quarter.

The company reported net income of US$159.2m, or 35 cents per share, for the third quarter to 11 September, compared to $202.5m, or 45 cents per share, in the third quarter of 2003.

Net income for the third quarter includes an estimated impact of approximately $45m after tax (10 cents per share) as the company recovers from the strike in Southern California, and also includes contributions to two Northern California UFCW multi-employer health and welfare plans of $12.1m after tax, partially offset by a tax benefit of $32.4m.

The company said the strike, which lasted from 11 October 2003 to 26 February 2004, is still impacting its sales and although post-strike sales have improved, they have not recovered to pre-strike levels. Safeway said it is continuing to focus on rebuilding sales through promotional pricing, direct marketing and the introduction of new proprietary products, such as Ranchers Reserve Beef.

Total sales remained relatively flat at $8.3bn in the third quarter, as additional sales from fuel and new store openings were offset by the impact of the strike. Excluding sales at strike-affected stores, comparable store sales increased 1.0% and identical store sales (which exclude replacement stores) increased 0.6% for the quarter. Further excluding the effect of fuel sales, comparable store sales declined 0.5% and identical store sales declined 0.9%.