Safeway Inc. (NYSE:SWY) reported its second quarter earnings before opening bell this morning, announcing plans to sell its Canadian operations and missing the expectations of analysts. Analysts were expecting the grocery store chain to report earnings per share of 50 cents on revenue of $10.45 billion.
The company’s net income for the second quarter was $8.4 million. After adjustments for items, net income was $125.1 million or 51 cents per diluted share.
Safeway to sell Canadian division
Along with today’s second quarter earnings report, Safeway Inc. (NYSE:SWY) released details regarding the sale of its Canadian operations. The chain will sell the net assets of Canada Safeway Limited to Sobeys Inc., a grocery store chain in Canada which is a subsidiary of Empire Company Limited.
Safeway breaks down Q2 results
The chain reported income of $58.1 million or 24 cents per diluted share from its continuing operations. Excluding items, income from continuing operations was 28 cents per diluted share, compared to 20 cents per diluted share in the same quarter a year ago.
The company posted losses from its discontinued Canadian operations, net of tax, of 21 cents per diluted share, including a $106.7 million tax charge on those operations. The tax charge was in connection with the company’s sale of the operations. Excluding that tax charge, income from discontinued operations was $57.4 million or 23 cents per diluted share.
Safeway reports lower sales
The grocery store chain’s sales and other revenue fell 1.6 percent to $8.7 billion during the quarter, compared to $8.8 billion in the same quarter a year ago. The company attributed the decline to lower fuel sales this year and also the disposition of Genuardi’s stores last year.
Gross profits did climbed 29 basis points to 26.23 percent of the company’s sales during the second quarter, compared to 25.94 percent in the same quarter a year ago.
Safeway spins off Blackhawk
During the second quarter of the year, Safeway Inc. (NYSE:SWY) completed the spinoff of its Blackhawk subsidiary. The new company’s initial public offering was for 11.5 million shares of Class A common stock at $23 per share. Safeway itself sold 11.3 million shares as part of that IPO, reducing its ownership from about 95 percent of Blackhawk to 73 percent.
Safeway provides guidance
Safeway Inc. (NYSE:SWY) guided for adjusted diluted earnings per share of between $1.02 and $1.12 per share for the full year, compared to last year’s 99 cents per share. The guidance doesn’t assume any benefit from the sale of the company’s Canadian operations.
After making adjustments for the sale and also the Blackhawk IPO and the decline in tax expense after income tax matters were resolved, the company said its guidance is at the lower end of its previously expected guidance of between $2.25 and $2.45 per share.