On Dec 31, Zacks Investment Research downgraded
) to a Zacks Rank #5 (Strong Sell) from a Zacks Rank #4 (Sell).
Why the Downgrade?
The Zacks Consensus Estimate for 2013 decreased 5.4% to $1.05 per
share over the last 90 days. Likewise, the Zacks Consensus
Estimate for 2014 dropped to $1.68 from $1.73 over the same
timeframe, reflecting a decline of 2.9%.
The weak U.S. economy has led to reduced consumer spending.
Consumers are showing strong preference for less expensive mix of
products, while others are shifting to discounters for purchase
of grocery items. The persistent downturn in economic conditions
has affected the performance of the company in the previous three
quarters in 2013.
On Oct 10, Safeway reported adjusted earnings per share (EPS)
from continuing operations of 10 cents in the third quarter of
2013 compared with 16 cents in the year-ago quarter. The results
were also behind the Zacks Consensus Estimate by 37.5%. Safeway
also missed the Zacks Consensus Estimates in the last three out
of four quarters.
A marginal rise in revenues was, however, offset by contraction
in both gross and operating margins. Moreover, Safeway is
expected to undergo further margin pressure following the close
of the Canadian operations, otherwise, a profitable business for
Following a disappointing third quarter, Safeway also reduced its
guidance for 2013.The company expects adjusted EPS to be in the
range of 93 cents to $1.00, as against the last year of 99 cents.
Recently, Safeway also voluntarily recalled some of its products
from the market supplied by Reser's Fine Foods or Taylor Farms.
The recall came on the back of possible contamination of the food
items with Listeria monocytogenes. Such events, we believe, might
have a ripple effect, lowering investor confidence and hampering
growth prospects for Safeway, going forward.
Other Stocks to Consider
Investors interested in the retail industry can consider
Harris Teeter Supermarkets, Inc
). All the stocks sport a Zacks Rank #2 (Buy).
CARREFOUR SA (CRRFY): Get Free Report
HERBALIFE LTD (HLF): Free Stock Analysis
HARRIS TEETER (HTSI): Free Stock Analysis
SAFEWAY INC (SWY): Free Stock Analysis Report
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