PLEASANTON, CA-The Safeway supermarket chain expects to open approximately 25 of its new “Lifestyle” stores and complete approximately 275 Lifestyle remodels this year, company officials said Thursday in discussing the chain’s financial performance in 2006 and its plans for 2007. Speaking at a conference call for financial analysts, company officials said that they expect to spend approximately $1.7 billion in capital expenditures during the year, with much of that earmarked for the store expansions and remodelings.

The new Lifestyle stores have been the centerpiece of an overall strategy that Safeway has been pursuing, and that strategy is paying off, the company said Thursday. The Safeway Lifestyle format, which it is implementing in a store remodeling program and also in all of its new locations, features a decor designed to be more inviting, with subdued lighting, an emphasis on high-quality fresh products and, in many cases, a large selection of natural and organic foods. Many Lifestyle stores also feature full-service meat counters, bakeries and floral design centers as well as sushi and olive bars.

The plans for the new Lifestyle stores in 2007 follow the company’s opening of 17 new Lifestyle stores and completion of 276 Lifestyle remodels during 2006, a year in which the company also closed 31 stores. In the conference call Thursday, Safeway chairman and president Steve Burd credited the new stores with contributing to improved financial results for the quarter and for the year.

For the fourth quarter ended Dec. 31, the company reported net income of $307.9 million, or 69 cents per diluted share, compared with net income of $173.5 million and 39 cents per diluted share for the fourth quarter ended Dec. 31, 2005. Total sales increased 3.8% to $12.5 billion in the fourth quarter, with contributions from Lifestyle stores and strong perishable and non-perishable performance drove this increase. Identical-store sales, including and excluding fuel, increased 3.5% in the fourth quarter.

For the year, Safeway’s net income was $870.6 million, or $1.94 per diluted share, compared to $561.1 million and $1.25 per diluted share in 2005. Sales increased 4.6% to $40.2 billion in 2006.

The financial results demonstrate that “our strategy continues to work well,” Burd said in the conference call. The Pleasanton-based chain, one of the largest food and drug retailers in North America based on sales, operates 1,761 stores in the US and Canada.

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