Stalked Safeway tops forecasts

SAFEWAY returned to sales growth in its second quarter despite the distractions of the multi-billion-pound auction for the supermarkets group.

Growth was 0.7% like-for-like, well behind competitors such as Tesco but comfortably exceeding the estimates of analysts, who had feared a decline of up to 2%.

Describing the results as 'pleasing', chief executive Carlos Criado-Perez said: 'Our people have risen brilliantly to the challenge of serving our 10m customers in very testing circumstances and Safeway has delivered stable trading, solid results and strong cash generation.'

The second-quarter growth reverses the 0.6% reduction in the first quarter, leaving Safeway with a 0.1% first-half advance. Total sales over the 26 weeks to 11 October rose by 1.2% to £5.18bn.

The group, Britain's fourth-largest supermarkets chain, estimates interim profits will be £173m before exceptionals, from £187m last year. The latest figure will include additional pension costs of £8m.

Costs of the takeover battle continue to mount. Safeway paid £3m in fees during the period and £9m of loyalty bonuses to retain staff.

There was also £2m of redundancy costs. Cleared bidder Wm Morrison and potential buyers of the 53 stores required to be sold for the deal to go ahead are still in talks with the Office of Fair Trading. A new bid could be some weeks away.

Billionaire Philip Green has also yet to decide whether to launch an offer.