Safeway planning to pass through more inflation.

safeíndiceSafeway said Wednesday it expects to pass through most of the inflation it is experiencing during the second quarter after seeing first-quarter income come in “slightly below plan,” partly as a result of not passing along inflation in produce, meat and pharmacy for competitive reasons.

Robert Edwards, president and CEO, said Safeway was able to drive first-quarter sales momentum as a result of several ongoing initiatives, adding the chain expects to improve second-half profitability through the direct and indirect cost initiatives it is implementing, which include center store remodels and merchandising premium, Hispanic and Asian products to meet local demographic needs.

Edwards said Safeway is also continuing to see a rapid pace of growth in organic and natural products, with its controlled-label O Organics and Open Nature growing “approximately two times faster than the rest of the market.”

Safeway reported a loss on continuing operations for the 12-week first quarter of $83.1 million, which included merger-related expenses of $2.5 million and a loss on foreign currency translation of $93.4 million; the loss for the year-ago first quarter was $59.7 million, which included a $17.2 million income-tax reduction on corporate-owned life insurance policies and a $5 million reduction of tax expense due to the resolution of federal income tax matters.

Excluding the unusual items, the loss for the quarter was $12.8 million, compared with a loss of $37.5 million last year.

Sales and other revenue increased 1% to $8.3 billion, while identical-store sales excluding fuel rose 1.8%, including a 1% increase in price per item and a 0.8% increase in volume. Second-quarter ID sales are running “well above 2%,” Edwards said.

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