For investors, Safeway (NYSE:SWY) hasn't seemed all that safe for a while. Today, the grocer reported a lower quarterly profit, citing among other things the infamous strike in Southern California, which ended in February.
Safeway's second-quarter profit slid 3.6% to $155.2 million, or $0.35 per share. Total sales gained only a mere 1% to $8.36 billion since the same time last year. The company said that a partial reason for the lower earnings was the amount of incentives it had to offer to draw California consumers back to its stores following the strike.
Though it said it has improved sales in Southern California, it said that it still has not boosted them to pre-strike levels. Excluding the impact of the strike, Safeway earned $0.46 per share.
It's been no secret that the California strike made a tough situation worse for traditional grocers. Much has been made about the headway competitors such as Costco (NASDAQ:COST), Wal-Mart's (NYSE:WMT) supercenters, and "supernatural" grocers such as Whole Foods Market (NASDAQ:WFMI) have made at the expense of big grocers such as Safeway.
The strike also had an impact on grocers such as Albertson's (NYSE:ABS) and Kroger (NYSE:KR) and made things even tougher for traditional supermarkets when many shoppers fled to the rival forces noted above.
It's hard to rule out concerns that Safeway's just being squeezed from all sides -- with bargain hunters tempted by discounters and the higher-spending consumers lured by the "supernaturals." Gas-price angst and inflation worries also haunt shoppers right now.
The grocery retailer said it is trending along the low end of its yearly earnings projections and sports a forward P/E ratio of 13, which may sound pricey given the recent trends and concerns about growth. It seems that more time is likely needed before investors can feel "safe" with Safeway.
Are you looking for more on supermarkets? Check out the following Fool content:
- Do traditional grocers represent an opportunity or value trap?
- Ever wondered about the supermarket cashier's side of the story?
- Are natural foods providers stealing market share?
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Alyce Lomax does not own shares of any of the companies mentioned.
