PLEASANTON, CA-Safeway Inc. continued its march toward converting all of its 1,770 stores to its new “Lifestyle” format and opened five new locations in the second quarter ended June 17, company officials reported Thursday during the supermarket chain’s quarterly conference call with financial analysts. The chain reported what one executive called “a very good quarter” financially, with increases in earnings, earnings per share, sales and comparable store sales.

Steve Burd, Safeway’s chairman, president and CEO pointed out that the company opened five new Lifestyle stores and completed 80 Lifestyle remodels in the first half of 2006. For the year, the company expects to spend approximately $1.6 billion in capital expenditures, open approximately 20 new Lifestyle stores, and complete approximately 280 Lifestyle remodels.

Through the end of the second quarter, 31% of the stores had been converted to or opened in the Lifestyle format, Burd noted. The company has invested $741.3 million in capital expenditures in the first 24 weeks of 2006 in its efforts to remodel and to open the new Lifestyle locations.

In answer to a question from an analyst about whether Safeway would be interested in acquiring any of the Albertson’s stores that are being closed, Burd declined to comment specifically, citing “competitive and other reasons.” However, he commented that, “If you think about the stores that they announced the closings on, they are small-volume stores and the reason they closed them rather than tried to market them was because they were probably the bleeders.” Such stores “are probably not attractive” to other supermarket chains, although they might appeal to some “nonconventional operators.”

In commenting on the company’s financial performance during the second quarter, Burd said, “If I were to say that this was a good quarter, that would probably be a pretty big understatement. We would characterize this as a very good quarter.”

Safeway’s net income climbed to $246.2 million, or 55 cents per diluted share, compared with $134 million, or 300 cents a share in the comparable quarter last year. Burd pointed out that the results were somewhat skewed this year because the second quarter this year included a one-time $58.5 million reduction in income tax expense that boosted earnings by 13 cents per share. But even without that boost, he added, the earnings still rose significantly.

Total sales increased 6.4% to $9.4 billion in the second quarter from $8.8 billion in the second quarter of 2005, with identical-stores sales increasing 5.6%. The rise in identical store sales included help from fuel sales, but even excluding fuel sales, identical-store sales increased 4.2%.

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