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Friday, July 23, 2010

Lower prices, less loyal consumers

On the call: Safeway CEO Steve Burd

Safeway Inc. reported its second-quarter results Thursday. The grocery chain's net income fell sharply and its revenue grew less than 1 percent. But Steve Burd, the company's CEO said it saw some of its best volume growth in years. He discusses the changes in shopping trends during a conference call with investors.

QUESTION: You suggested that a lot of your volume growth is coming from the occasional shopper. I'm just curious if you could talk a little bit about that shopper's basket relative to the average. I guess specifically, is that a cherry picker shopper only coming in for the deals? Or are you seeing that shopper kind of expand the breath of shopping across the store?

RESPONSE: I said that we've got our very loyal shopper who is less affected by the price reductions that we made (on everyday items). They really love the experience and they appreciate the lower prices, but there is not that much behavior change they can engage in.

So if you look at everybody below that -- which could be somebody that is visiting you twice a week but is not loyal, all the way down to the occasional (shopper) -- I did not mean to suggest that the occasional is the lion's share of our sales growth because it's not. But basically as you tier away from the most loyal, basically it's the other categories (of shoppers) that are generating most of the volume increase.