The retailer is in the midst of the renovations as it scalesback its store-opening program. Through the first two quarters ofthe fiscal year, Safeway only opened five new units, but undertook82 renovations. So far this year the company spent $753.1 millionon the remodel program and is targeting $1.7 billion for theyear.

During Safeway's second-quarter conference call, Steve Burd, thecompany's chairman and chief executive officer, said that the chainwill focus on renovations as opposed to new openings for the nextfew years. "We still think that's the right course of action giventhat we've got another 50% of our stores to lifestyle," he say,adding. "We're very alert to good real estate that comes up, andsometimes we'll buy it and secure it for a future store site."

In response to an analyst's question, Byrd acknowledged that hischain might be losing physical market share in some regions wherecompetitors, like British retailer Tesco, are rapidly opening newstores. He says that strong sales at the lifestyle locations aremaking up for the closing square footage gap. "Despite a verymodest store-building program, we are still gaining market share,"he says. "It hasn't hurt us. It hasn't hurt our ability to growearnings."