US grocery retailer Safeway has reported a sharp drop in quarterly profit due to the impact of a labour dispute in Southern California, which lasted more than four months.

The company posted net income of US$43.1m, or 10 cents per share, for the first quarter to 27 March, compared to $162.6m, or 36 cents per share, in the same quarter of 2003.

Safeway said it estimates the impact of the strike on first-quarter results to be $122.0m after tax. Results were also impacted by the closure of 12 underperforming Dominick’s stores, which reduced earnings by $28.5m after tax. Excluding these items, earnings would have been 43 cents per share in the first quarter.

Total sales decreased to $7.6bn in the first quarter of 2004 from $8.0bn in the first quarter of 2003, as the impact of the strike was only partially offset by new store openings and additional fuel sales.

Excluding sales at strike-affected stores, first-quarter 2004 comparable store sales increased 0.5% while identical store sales (which exclude replacement stores) rose 0.1%. Further excluding the effect of fuel sales, comparable store sales declined 0.8% and identical store sales declined 1.3%.

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“We are pleased with our results given the challenges we faced in the first quarter,” said chairman and CEO Steve Burd. “Sales picked up in the latter part of the first quarter and continued into the second quarter. Excluding Vons, identical store sales were 1.1% in March and April. This sales improvement is broad-based and we remain optimistic about the remainder of the year.”