NEW YORK (AP) -- Safeway Inc. reported revenue for the first quarter that missed Wall Street expectations as it sacrificed profit to keep prices lower to hold onto customers.
The company, which operates more than 1,600 locations under names including Safeway and Vons, stood by its forecast for the year.
Safeway, based in Pleasanton, Calif., has been pushing its "Just For U" loyalty program as a way to fend off competitors including big-box retailers like Target and Wal-Mart and drug store chains. The program offers personalized discounts based on past purchases.
CEO Steve Burd noted in a statement that more customers are signing up for the program. But during the quarter, Safeway noted that it gross profit as a percentage of sales fell in large part because of "investments in price," or lower prices.
Sales at stores open at least a year, a key indicator of health, rose 1.5 percent. Part of the increase was result of shift in the calendar, which moved New Year's holiday sales into the period.
For the quarter, Safeway's net income rose as a result of tax benefits.
The company earned $118.9 million, or 49 cents per share, for the three months ended March 23. That's up from $72.9 million, or 27 cents per share, a year ago. Tax benefits contributed 14 cents per share to the latest quarter.
Net sales dipped to $9.99 billion, from $10 billion a year ago, as the company sold its Genuardi's stores.
Analysts on average expect a profit of 35 cents per share on revenue of $10.15 billion.
Shares of Safeway fell $3.73, or 13 percent, to $24.53.
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