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12/9/2004

Safeway sees strike hurting 2005 earnings

The Associated Press

PLEASANTON, Calif. — Safeway Inc. said the California grocery workers strike that ended in late February will continue to hurt its 2005 earnings by about 20 cents a share.

Last year, workers at several major Southern California grocery store chains, including Safeway’s regional supermarket chain Vons, went on a 41/2-month strike over health insurance.

The Pleasanton-based company on Wednesday said it expects 2005 earnings of $1.41 to $1.51 a share. That includes a charge of 9 cents a share related to stock options expensing, 20 cents a share because of lingering strike effects and incremental marketing expenditures of 20 cents a share.

Analysts were expecting earnings of $1.67 a share, including strike-related charges, according to Thomson First Call.

Free cash flow, which is the cash flow from operating activities less cash flow used in investing activities, is projected to be $500 million to $700 million for 2005.

The company anticipates about $1.4 billion in capital expenditures in 2005, and plans to open 30 to 35 new stores and remodel 275 to 285 stores.

Safeway said it expects a gradual recovery from the strike and an increase in brand-building and other marketing investments to improve sales.