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SAFEWAY INC. ANNOUNCES 1992 EARNINGS AND RESTRUCTURING

 OAKLAND, Calif., Feb. 8 /PRNewswire/ -- Safeway Inc. (NYSE: SWY) today reported income before extraordinary items and the cumulative effect of accounting changes for 1992 of $98.4 million (83 cents per share) compared to $79 million (69 cents per share) in 1991. Three unusual events affected net income in 1992 and 1991:
 1992: Restructuring charges reduced 1992 operating profit by $22.3 million and net income by $13.8 million (12 cents per share).
 1991: A reserve associated with the bankruptcy of AppleTree Markets, Inc. reduced 1991 operating profit by $115 million and net income by $71 million (62 cents per share).
 1991: A $27.4 million gain from the sale of common stock by Vons increased 1991 net income by $16.9 million (15 cents per share).
 "There are modest indications that some of our markets are slowly recovering from the recession," said Peter A. Magowan, chairman and chief executive officer. "However, Safeway is continuing to take action to reduce its cost structure to compete effectively in a difficult time. The fourth quarter restructuring charges are for anticipated costs associated with consolidating our distribution center in Sacramento into our new distribution center in Tracy, Calif., and downsizing our corporate administrative staff.
 "Another important element of our cost structure is labor parity in our retail markets," continued Magowan. "While we share similar labor costs with our principal competitors, we have a problem in our Alberta, Canada, market caused by the entry of new competitors whose labor costs are substantially below ours. This problem has become very serious in the last few months to the point that fourth quarter profits in Alberta have fallen significantly. We now expect 1993 operating profits in Alberta to fall below 1992 levels by as much as $50 million if no action is taken. We have been talking to our Alberta labor unions for the past few weeks and today initiated discussions with all of our Alberta employees to determine how we can work together to eliminate the labor cost disparity and improve our competitive position in this important market. We plan to reinvest any labor savings to strengthen market share in Alberta. However, if efforts to address our labor costs fail, we may have to abandon the Alberta market altogether.
 "While the Alberta situation will lower profits in the near term, we believe that actions being taken there together with the restructuring discussed above will contribute to our success going forward," concluded Magowan.
 Sales were $15.2 billion in 1992 (53 weeks) compared to $15.1 billion in 1991 (52 weeks). Same-store sales (sales of stores operating the entire measurement period in both years) decreased 2.7 percent for the year and 3.2 percent for the fourth quarter. A weak economy, lack of inflation and increased competition in certain markets have reduced sales growth at Safeway and throughout the grocery industry. A decline in the currency exchange rate used to translate sales in Canada into U.S. dollars also reduced reported sales in 1992. If the exchange rate had remained unchanged throughout 1992, same-store sales would have decline 1.6 percent for the year and 1.1 percent for the fourth quarter.
 Gross profit was 27.5 percent of sales in 1992 compared to 27.2 percent in 1991. Improved gross profit margins reflect the continuing benefits from additional store specialty departments and investments in inventory purchasing systems, offset in part by sharper pricing in certain markets and startup costs at Safeway's Tracy distribution center. Because of the lack of inflation, Safeway had LIFO income of $0.4 million in 1992 compared to LIFO expense of $8.1 million in 1991.
 Lack of sales growth, restructuring charges, scheduled wage rate increases and growing fixed costs from the capital expenditure program have combined to push operating and administrative expenses to 24.6 percent of sales in 1992 compared to 23.5 percent in 1991.
 Operating profit was $441.6 million (2.9 percent of sales) in 1992 compared to $433.3 million (2.9 percent of sales) in 1991. Excluding the $115 million AppleTree charge, operating profit was $548.3 million (3.6 percent of sales) in 1991.
 Interest expense fell to $290.4 million in 1992 from $355.4 million in 1991. Safeway achieved most of this $65 million improvement by retiring or refinancing $1.6 billion of high interest rate debt from mid-1991 through mid-1992. In addition to lowering interest expense, these refinancings extended debt maturities and increased the company's financial flexibility. Lower short-term interest rates also contributed to reduced interest expense.
 Equity in earnings of unconsolidated affiliates, recorded on a one- quarter delay basis, was $39.1 million in 1992 compared to $45.8 million in 1991. Increased income from Safeway's 49 percent equity investment in Casa Ley, a retailer in western Mexico, was offset by reduced income from Safeway's 35 percent equity investment in Vons, the leading supermarket chain in Southern California. Even though Vons increased operating income slightly, they incurred an extraordinary loss in 1992 compared to an extraordinary gain in 1991.
 Extraordinary losses from the early retirement of debt reduced net income by $27.8 million (23 cents per share) in 1992 and $24.1 million (21 cents per share) in 1991. These losses consist of redemption premiums and the write-off of deferred finance costs.
 In 1992 accounting changes reduced net income by $27.1 million (23 cents per share). The company adopted new accounting rules for post- retirement and post-employment benefits. The cumulative effect of Safeway's accounting changes reduced net income by $12.3 million (10 cents per share). In addition, Vons adopted new accounting rules for post-retirement benefits and income taxes. Safeway's 35 percent share of the cumulative effect of Vons' accounting changes reduced net income by $14.8 million (13 cents per share).
 Operating cash flow (FIFO earnings before income taxes, interest, depreciation, amortization, income from unconsolidated affiliates, AppleTree charge, extraordinary losses and the cumulative effect of accounting changes) declined to $768.6 million in 1992 from $867.4 million in 1991. However, lower interest expense improved the ratio of operating cash flow to interest expense to 2.65 in 1992 from 2.44 in 1991. This ratio is an important measure of Safeway's ability to service its debt.
 In 1992 Safeway invested $553 million in its capital expenditure program, opening 35 new stores and completing 63 remodels. In view of the near-term operating challenges, Safeway's capital investment program will be scaled back in 1993 when the company expects to invest approximately $400 million in its existing markets. Over time, the company plans to continue its capital investment program at an annual level of $500 million to $600 million.
 SAFEWAY INC. AND SUBSIDIARIES
 (In millions, except per-share amounts)
 Fiscal Year Fiscal Quarter
 1/2/93 12/28/91 1/2/93 12/28/91
 53 weeks 52 weeks 17 weeks 16 weeks
 Sales $15,151.9 $15,119.2 $4,849.8 $4,661.8
 Gross profit 4,164.5 4,105.6 1,342.0 1,270.8
 Oper. & admin. expenses (3,722.9) (3,557.3) (1,222.1) (1,121.9)
 AppleTree charge -- (115.0) -- (115.0)
 Operating profit 441.6 433.3 119.9 33.9
 Interest expense (290.4) (355.4) (88.9) (101.8)
 Equity in earnings of
 unconsolidated affiliates 39.1 45.8 15.0 13.0
 Gain on common stock offering
 by unconsolidated affiliate -- 27.4 -- --
 Other income, net 7.1 15.1 0.5 3.2
 Inc. (loss) bef. inc. taxes,
 extraord. loss & cumulative
 effect of accountg. changes 197.4 166.2 46.5 (51.7)
 Income tax (99.0) (87.2) (24.3) 15.4
 Inc. (loss) bef. extraord.
 loss and cumulative effect
 of accounting changes 98.4 79.0 22.2 (36.3)
 Extraordinary loss related
 to early retirement of debt (27.8) (24.1) -- (11.4)
 Cumulative effect of
 accounting changes (27.1) -- -- --
 Net income (loss) 43.5 54.9 22.2 (47.7)
 Inc. (loss) per com. share
 and common share equivalent
 (fully diluted):
 Inc. (loss) bef. extraord.
 loss & cumulative effect of
 accounting changes $0.83 $0.69 $0.19 $(0.37)
 Extraordinary loss (0.23) (0.21) -- (0.11)
 Cumulative effect of
 accounting changes (0.23) -- -- --
 Net income (loss) 0.37 0.48 0.19 (0.48)
 Wtd. avg. com. shares and
 common share equivalents
 (fully diluted) 119.0 115.2 118.3 98.9
 Operating cash flow(A) 768.6 867.4 210.8 240.0
 (as a percent of sales) 5.07 5.74 4.35 5.15
 (as a multiple of
 interest expense) 2.65 2.44 2.37 2.36
 (A) FIFO earnings before income taxes, interest, depreciation, amortization, income from unconsolidated affiliates, AppleTree charge, extraordinary losses and the cumulative effect of accounting changes.
 -0- 2/8/93
 /CONTACT: Melissa C. Plaisance of Safeway, 510-891-3136/
 (SWY)


CO: Safeway Inc. ST: California IN: REA SU: ERN

SM-CK -- NY014 -- 3947 02/08/93 09:16 EST
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