In addition to explaining reasons for the considerably strongerperformance, Safeway executives at Tuesday's conference callcommented on plans for remodeling the chain's stores, part of arepositioning that was reported on in detail on April. "We think that the third quarter is clearly going to be astronger quarter for remodels," said Steve Burd, the company'schairman, president and CEO. "We will probably do something in the70 to 80 store range for the second quarter and push that up toalmost one a day in the third quarter." Safeway is remodeling itslocations as "Lifestyle" stores, a key component of itsrepositioning, which also includes a $100 million rebrandingcampaign that will include new advertising, a new slogan, a newidentity and other elements. The company opened seven new storesand completed 28 Lifestyle remodels in the first quarter. For theyear, the company expects to spend approximately $1.4 billion incapital expenditures and open approximately 30 new Lifestyle storesand complete approximately 280 to 290 Lifestyle remodels. Byyear-end 2005, Safeway estimates that 25% of its store base will bein the Lifestyle format.

In reporting its first quarter results, Safeway pointed out thatsales in the first quarter this year surpassed those of the firstquarter last year in part because sales in last year's firstquarter were reduced by a strike in Southern California thatcovered eight weeks of the 12-week quarter. Additionally, Easterholiday sales occurred in first quarter of 2005 compared to thesecond quarter of 2004. Safeway Inc. operates 1,801 stores in theUS and Canada.

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