- Safeway reported a net loss of $76.5 million for the first quarter, a considerable drop from the $118.9 million in net income a year earlier.
- Sales at the supermarket chain were good. Revenue rose 1% to $8.26 billion, in keeping with analysts' estimates. Revenue from stores open for at least one year rose 1.8%.
- The problem, according to Safeway, was the rising cost of goods at wholesale -- particularly in meat, produce and pharmacy goods.
It's never been easy to make a profit in the grocery business. The margins have always been thin, but in today's hyper-competitive environment, it's harder than ever.
Often, the key to survival is to keep your prices low, even as your costs rise -- taking a loss in order to keep market share. The big boys in retail do a fair amount of that. And it's usually the little, independent operators who fall in a price war.
Safeway said yesterday that it was going to stop engaging in that behavior. The retailer said it had failed to pass on inflation to its customers, but planned to do so in the present quarter. In everyday language, that means grocery prices will rise at Safeway.
With costs rising as fast as they are, even the Safeways of the world may no longer have deep enough pockets to take the loss to keep a customer.