US grocery retailer Safeway has said it plans to spend more on brand building and other marketing investments in 2005 as it tries to boost sales.
For the year 2005, the company said it is expecting earnings per share of $1.50 to $1.60, excluding the expensing of stock options.
The company said it anticipates a gradual strike recovery at its Southern California chain Vons. In 2005, the Vons strike is projected to have an impact on earnings of approximately 20 cents per share compared to pre-strike results, and higher marketing expenditures are projected to reduce earnings by approximately 20 cents per share. The company expects to generate non-fuel identical store sales growth of 1.2% to 1.5% in 2005, excluding Vons in the first quarter.
The company said it plans to spend approximately $1.4bn in cash capital expenditures in 2005 to open 30-35 new stores and to remodel 275 to 285 stores. Square footage growth is expected to be approximately 1%.
“We made substantial progress in differentiating our offering in 2004, and we plan to step up those efforts in 2005. We have made dramatic improvements in our perishable departments, have grown our proprietary products substantially, and have confirmed the value of our store remodel programme. We also expect to benefit from the significant progress we made in restructuring our labour contracts and from our improved organisational structure,” said Steve Burd, chairman, president and CEO.
“In 2005, we plan to make substantial brand building and other marketing investments to improve sales momentum. We are confident that these actions will restore growth to our business in 2005 and beyond,” he added.
Separately, Safeway said that, together with the other major unionised grocery chains, it has agreed with the San Francisco Bay Area United Food and Commercial Workers Union (UFCW) Locals to extend the expiring labour agreements and continue bargaining to 15 January 2005.
“This extension is a positive development for all parties involved. By working together at the bargaining table, we can find solutions to the challenges that face the unionised supermarket industry. These challenges are well chronicled: skyrocketing health care costs and the dramatic rise of non-union competitors who pay far lower wages and far fewer benefits,” Safeway said.