Safeway Disinflation Magic Trick

Safeway Medallion logo, 1980

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Safeway (SWY) announced Q3 results telling investors revenues are down because the per item sales price is off. That is called disinflation. The EPS was managed upward by reducing the float. This can only go on for so long (usually not long) before investors become disillusioned with the disappearing act.

Top line growth has no substitute. Financial engineering magic tricks are short-term desperate tactics. Safeway is spending four times as much on share buy backs as they are on dividends. Not a sustainable strategy. But listen to what the boss had to say.

“Our third quarter results were in line with our expectations,” said Steve Burd, Chairman, President and CEO”

Disclosure: George Gutowski writes from a caveat emptor perspective. He holds no positions in stocks mentioned in this post.