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PLEASANTON, CA-Safeway Inc., posting higher sales and earnings for the third quarter in financial filings released Thursday, reported that it is on track with its Lifestyle store makeovers, a program designed to turn all of its new and existing locations into the Lifestyle format. “Our Lifestyle store rollout, along with innovation in both perishable and non-perishable offerings, continues to generate sales growth in our stores,” Safeway president, chairman and CEO Steve Burd commented in a conference call with financial analysts Thursday.

Burd told the conference call listeners that the Lifestyle store program is “right on track” with plans first envisioned for the program three years ago. The new store portion of the program “is modest at this point” in the year because it is “heavily back-end loaded,” Burd explained. “In the third quarter we completed only one new store, but more importantly we completed 76 remodels during the quarter,” Burd said.

With the six new stores that Safeway has opened this year to date, combined with the 158 remodeling jobs that it has completed, some 53% or 915 of the chain’s stores now feature the Lifestyle format. By the end of the year, Safeway will have 1,026 of its stores in the Lifestyle format, or 59% of its store total. The company has spent $1.2 billion thus far this year on the new store and store remodeling efforts, along with other capital expenditures, and expects to spend $1.7 billion by year end.

Burd delivered a generally positive report on the company’s performance during the quarter, pointing out that its 13% increase in earnings per share, to 44 cents, resulted primarily from increased sales and improved operating efficiencies. Total sales rose 3.9% to $9.8 billion and comparable store sales rose 3.2%, excluding fuel sales. Burd noted that identical store sales increased 3% “on top of a very strong 3.7% last year,” adding that this is the third consecutive quarter in which all 10 operating areas of the company have shown positive identical store sales.

The company’s 13% increase in earnings per share came on net income that grew to $194.6 million for the quarter, up from $173.5 million and 39 cents per diluted share in the third quarter of last year. Burd also cited lower advertising and supply chain expenses for a positive impact on earnings in the quarter, pointing out that Safeway’s gross profit margin increased 21 basis points to 28.51% of sales in the third quarter of 2007 compared to 28.3% in the third quarter of 2006.

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