Safeway Rides High on Personalized Shopper Discounts and Strong Sales

Michael Teague  |

On Thursday, while the broader market was heading in a southerly direction ahead of a fresh round of “fiscal cliff” negotiations and European worries, the supermarket chain Safeway (SWY)pushed its cart in the exact opposite direction of the trend.  The company’s shares closed the day with a 14 percent gain at $22.97, hitting a new 52-week high.

The spike followed the release of very strong fourth quarter earnings reports that indicate the company gained 13 percent to $244 million, or $0.94 per share, surpassing analyst targets of $0.76 per share.  As well, Q4 sales rang in at $13.77 billion, beating estimates of $13.6 billion.

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Safeway’s strong showing can be attributed to a number of factors, but primarily the success of its rewards program. Like most supermarket chains, the company has a membership club card that gives customers access to discounts on both groceries and gasoline. But they managed to improve upon this idea recently by introducing their “Just For U” program that tailors discounts to the personal preferences and habits of individual shoppers. In the short time the program has been in place, the company claims that 5.4 million households have signed up for it.

The ingenious discount scheme was buttressed by a stock buyback that increased earnings-per-share by $0.17, while there has been speculation that the company would either sell or rebrand its operations in Canada.  Safeway’s chairman and CEO Steve Burd also said that the company’s identical-store sales would be up 2 percent in the first eight weeks of the Q1 of 2013.

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