Gabelli Comments on Safeway Morning Highlights

In a report published by Gabelli, Safeway's SWY annual investor conference on March 8th in Pleasanton, CA recapped another difficult year for food retailing. Gabelli said that the company plans to continue passing its rising costs to consumers, and believes competitors will do the same, while demand should be largely unaffected as consumers are used to low to mid-single digit type of inflation rate. “SWY believes there is upside to its 2011 guidance, especially if the unemployment rate and the consumer confidence index (currently at 8.9% and 70) improve beyond the company's 8.5% and 75 expectations for each by end of 2011, respectively. Shares currently trade at 11x and 4.8x our 2012P earnings and EBITDA, respectively. We expect EPS to grow at a 12% compounded annual rate through 2015, reflecting a modest 2.3% average annual sales growth, while benefiting from operating leverage and share buybacks.” Safeway closed yesterday at $22.43.