US grocer Safeway will slash prices next year and also run an aggressive cost-cutting programme to help it almost double its free cash flow.

The retailer, which also runs chains including Vons and Randalls, expects sales excluding fuel to rise between 2 and 3 per cent next year. Safeway intends to cut cash capital expenditure to US$1.2 billion (£810.5 million) from US$1.6 billion (£1.1 billion) in 2008.
Safeway chairman, president and chief executive Steve Burd said: “We are focusing on growing our business in this tough economic environment, as well as in the long run.”

Burd added that Safeway’s balance sheet is in “terrific shape” heading into next year. Debt at the end of 2009 is forecast to be down to US$4.7 billion (£3.2 billion) from US$5.4 billion (£3.6 billion) at the end of this year.

MHE Retail chairman Edward Whitefield thought that Safeway’s plans are “absolutely correct in the current climate”. He added: “Safeway has a profitable level of earnings on its sales to ride out the recession. It has smartened up its stores and moved into more perishable foods, as well as introducing more value lines.”

Safeway has 1,738 stores across the US and Canada. In the first 36 weeks of this year net income grew to US$627.4 million (£423.7 million) compared with US$587.2 million (£396.6 million) for the same period last year.