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PLEASANTON, CA-The Safeway supermarket chain plans to open 25 new stores in 2007 and to remodel 275 in its 1767-store chain, company officials said Tuesday in a conference with analysts and investors. The officials talked about store growth as one of a series of topics in a wide-ranging discussion of their past and future strategies for boosting sales and profits.

The company, which says its strategy is designed to “achieve sustainable 12% to 15% growth,” expects to spend approximately $1.7 billion in capital expenditures in 2007 for the new store completions and the remodelings. Safeway, which introduced its new Lifestyle store format in recent years, is opening its new locations in the Lifestyle format and is remodeling its other stores into that format. Safeway’s average store size is approximately 45,000 sf, but the Lifestyle stores are typically 55,000 sf.

The company has switched about 40% of its stores to the Lifestyle format since 2003, according to Steve Burd, Safeway’s chairman, president and CEO. He named a number of other initiatives the company has implemented, including its Blackhawk Network, a gift card unit that he called “a great example of how we plan to drive additional growth in years to come.” The Blackhawk Network subsidiary recently struck a deal with McDonald’s to sell McDonald’s Arch Cards in 1,500 US Safeway stores including Dominick’s, Vons, Pavilions, Genuardi’s, Randalls, Tom Thumb and Carrs.

Burd called the Lifestyle format “one kind of innovation” in an environment where “you have to be engaged in multiple innovations simultaneously” to succeed. He cited the company’s efforts in inventory control and supply chain management among other types of innovation that it has embarked upon as part of its growth strategy.

One of the avenues that Safeway has pursued in its Lifestyle stores is a combination of product quality and merchandising. It has focused on carrying high-quality produce and meats for example, marketing its meats under its Company’s Rancher’s Reserve name. It has also developed a variety of new items in the deli department, including sandwiches, soups and salads. At the same time, it has developed hundreds of items under its Safeway Select private label to compete with nationally advertised brands.

Among the efforts Safeway has launched is a program of closely analyzing data from its customers’ club cards to determine who spends the most, what they spend on and other information. The company believes the research can build customer loyalty, improve profitability and drive strong same-store sales.

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