Grocery giant Safeway (NYSE:SWY) offered up solid results late last week to investment shoppers. However, with the company's shares up nearly 45% in the past year, and with guidance calling for flattish per-share results this year, it's entirely possible that there may be a temporary pause in the upward march of the company's share price.

For the quarter ended Dec. 31, Safeway reported earnings of $307.9 million, or $0.69 per share, up from $173.5 million, or $0.39 per share, for the final quarter of 2005. The positive effects of various tax items increased the most recent quarter's net income by $0.08 per diluted share. Conversely, store exit activities, employee buyouts, and the favorable resolution of certain tax issues reduced net income for 2005's fourth quarter by $0.10 per share.

For the quarter ended December 2006, sales increased 3.8% to $12.5 billion, up from $12 billion year over year. The company attributed the increase to contributions from its Lifestyle stores and strong performances in both perishables and non-perishables. Identical-store sales were up 3.5% in the quarter. The Lifestyle format, which appears to be the wave of the future at the company, includes expanded bakeries, produce sections styled after outdoor markets, and large areas dedicated to flower sales.

For the full year, the company earned $1.94 per diluted share, up from $1.25 in 2005. Guidance for 2007 is for earnings to be in the range of $1.90 to $2 per share.

In announcing his company's results, Safeway Chairman, President, and CEO Steve Burd said, "Our fourth-quarter results demonstrate that our strategy continues to work well. By delivering superior perishables, completing more Lifestyle stores, making investments in price and promotion, controlling our costs, and delivering outstanding service, we are able to bring more to the table for our customers and our shareholders. We plan to continue to build on this momentum in 2007."

The Pleasanton, Calif.-based company, which operates 1,761 stores in the United States and Canada, bought back 3.7 million shares of its common stock during the quarter at an average cost of $28.84. $747 million remains on the buyback provision.

Safeway, with its growing number of Lifestyle stores, is attaching itself to the organic and higher-end side of the grocery business, which has been made popular by Texas-based Whole Foods (NASDAQ:WFMI). Last week, Whole Foods agreed to pay $565 million for Wild Oats (NASDAQ:OATS), a Colorado-based competitor. At the same time, Kroger (NYSE:KR) is similarly upgrading its own higher-end merchandising efforts, and even the grocery sections of mass merchandisers Wal-Mart (NYSE:WMT) and Costco (NASDAQ:COST) are now being stocked with organic foods and vintage wines.

The once-mundane grocery business continues to become more interesting. It will be especially worth the effort for Fools to monitor how much the movement to emulate Whole Foods' approach continues to affect Safeway's operations and financial results.

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Whole Foods and Costco are both Motley Fool Stock Advisor recommendations. A free 30-day trial to the market-beating newsletter is available here.

Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your questions and comments. Wal-Mart is a Motley Fool Inside Value recommendation. The Fool's disclosure policy is hand-crafted by Bavarian artisans.