Friday, July 20, 2012

Safeway profit plummets nearly 16 percent amid consumer gloom

Safeway profit plunged in its second quarter as the grocery chain attempted to battle a rising tide of competitors in Northern California and to cope with increasingly cautious consumers.

The Pleasanton-based company's stock fell to its lowest price in 16 years, plunging 4.2 percent Thursday to close at $15.80.

Perhaps the toughest challenge that confronts Safeway is shoppers feeling besieged by an economy that has yet to take off following the recession, said Steve Burd, Safeway's CEO.

Perhaps 25 percent of consumers in Safeway's territory feel confident, have kept their job or found a better one, are seeing improvement in their net worth and may be shopping at high-end retailers and supermarkets, Burd said.

Even if the economy were to bounce back, Safeway will have to deal with rising competition, warned Jonathan Feeney, an analyst with Janney Capital Markets.

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