US supermarket operator Safeway has reported a 40% drop in first-quarter profits as it was hit by competitive prices and higher pension and health care costs.

The California-based grocery firm said net income from continuing operations for the first quarter to 22 March was US$196.2m, or 44 cents a share, compared with $325.0m, or 66 cents a share, a year earlier.

Analysts polled by Thomson First Call had been expecting, on average, earnings of 44 cents a share, reported Reuters.

The company said its identical-store sales were roughly flat in the first quarter.

Safeway forecast earnings for the current quarter slightly below Wall Street expectations and full-year profit consistent with analysts’ forecasts.

The results for the latest quarter include a change in accounting methods for certain payments made by suppliers to promote their products. The change led to a reduction in earnings of around $10m.

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By GlobalData

Total sales for the quarter were up slightly to $7.5bn from $7.4bn, boosted by new store openings and fuel sales.

Safeway listed results from its Dominick’s chain, which it is in the process of selling, as discontinues operations and excluded them from its operating results.

Including those results, net income $162.6m. For the year-ago period, including Dominick’s and a $700m charge for an accounting change, Safeway reported a loss of $367.9m.