Safeway Inc (SWY) on Wednesday reported a smaller profit for the third quarter, as the grocery store chain's bottom line was weighed down by a hefty loss on debt extinguishment.
Pleasanton, California-based Safeway's third-quarter net income dropped to $9.5 million or $0.04 per share from $65.8 million or $0.27 per share last year. For the recent third quarter under review, the company recorded a loss on extinguishment of debt of $84.4 million or $0.22 per share.
On average, six analysts polled by Thomson Reuters estimate earnings of $0.16 per share for the quarter. Analysts' estimates typically exclude one-time items.
Third-quarter sales increased to $8.31 billion from $8.10 billion last year, driven largely by higher identical-store sales.
Analysts had a consensus revenue estimate of $8.45 billion for the quarter.
Gross margin increased 32 basis points to 26.18 percent from 25.86 percent last year, primarily due to a 38 basis-point increase from lower fuel sales.
In an SEC filing, Safeway said, "The company believes that recently consumer confidence has improved modestly, but remains cautious. The Company is responding to this challenging environment with marketing programs, such as just for U, and a continuing focus on cost control."
Early this year, Safeway agreed to be acquired by an investor group led by private equity firm Cerberus Capital Management for more than $9 billion. The acquisition is expected to close during the current quarter, subject to approval from the Federal Trade Commission.
Safeway had been divesting its business and simplifying it operations after being hurt by a weak economy and fierce competition from other big retailers. Before the merger deal, the company had exited from the Chicago market, after divesting its Canadian division and spinning-off Blackhawk, its prepaid gift cards and payment service business.
SWY is currently trading at $33.38, down $0.59 or 1.74%, on the NYSE.
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