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Industry News - April 24, 2008



Safeway Announces Sales Increase in First-Quarter 2008

Safeway reported net income of $193.4 million for the first quarter of 2008 compared to net income of $174.4 million in the first quarter of 2007.

Total sales increased 7.3% to $10.0 billion in the first quarter of 2008 compared to $9.3 billion in the first quarter of 2007. Contributions from Lifestyle stores, an increase in the Canadian dollar exchange rate and higher fuel sales drove this increase. Identical-store sales increased 4.5% in the first quarter of 2008. Excluding fuel, identical-store sales increased 2.9%. Easter holiday sales occurred in the first quarter of this year compared to the second quarter of last year. When adjusted for the estimated impact of the Easter holiday shift, non-fuel, identical-store sales increased 2.0%.

“We are pleased with our earnings performance in the first quarter of 2008,” said Steve Burd, Chairman, President and CEO. “Our earnings per share grew by 13% compared to the first quarter of 2007. Part of this growth was due to the shift in the Easter holiday. In addition, our efforts to reduce and control costs contributed to operating margin improvement. At the same time, we invested in lower prices to improve our competitiveness and enhance our consumer offering. We remain confident in our ability to deliver earnings per share growth in the 13-18% range for this 53-week year.”

Gross Profit
Gross profit declined 50 basis points to 28.79% of sales in the first quarter of 2008 compared to 29.29% of sales in the first quarter of 2007. Higher fuel sales (which have a lower gross margin) reduced gross profit by 38 basis points. The remaining 12 basis- point decline is the result of investments in price, partly offset by improved shrink and lower advertising expense.

Operating and Administrative Expense
Operating and administrative expense improved 65 basis points to 24.77% of sales in the first quarter of 2008 from 25.42% of sales in the first quarter of 2007. Higher fuel sales in 2008 reduced operating and administrative expense by 29 basis points. The remaining 36 basis point decline was the result of reduced employee costs, partly offset by a labor settlement in Alberta, Canada, and higher utility and occupancy costs.

Interest Expense
Interest expense declined slightly to $84.5 million in the first quarter of 2008 from $89.6 million in the first quarter of 2007 due to a combination of lower interest rates and lower average borrowings.

Other (Loss) Income, Net
Other income declined to a loss of $0.4 million in the first quarter of 2008 from $6.8 million income in the first quarter of 2007 due primarily to lower results at Casa Ley, Safeway’s unconsolidated affiliate.

Income Tax Expense
Income tax expense was $123.6 million, or 39.0% of pre-tax income in the first quarter of 2008. Income tax expense in the first quarter of 2007 was $103.8 million, or 37.3% of pre-tax income.

Stock Repurchases
During the first quarter of 2008, Safeway purchased 2.5 million shares of its common stock at an average price of $29.70 per share and a total cost of $74.1 million (including commissions). The remaining board authorization for stock repurchases at quarter-end was $447.0 million.

Capital Expenditures
Safeway invested $373.1 million in capital expenditures in the first quarter of 2008. The company opened one new Lifestyle store, completed 22 Lifestyle remodels and closed four stores. For the year, the company expects to spend $1.70 to $1.75 billion in capital expenditures, open 20 to 25 new Lifestyle stores and complete 250 to 255 Lifestyle remodels.

Cash Flow
Net cash flow used by operating activities was $41.2 million in the first quarter of 2008 compared to net cash flow from operating activities of $19.1 million in the first quarter of 2007.

Net cash flow used by investing activities was $370.7 million in the first quarter of 2008 compared to $391.7 million in the first quarter of 2007.

Net cash flow provided by financing activities was $352.9 million in the first quarter of 2008 compared to $305.7 million in the first quarter of 2007 primarily due to increased borrowings, partly offset by stock repurchases.


ARTS Announces International XML Standard

Retailer costs associated with calculation, collection, reporting and remission of local and national transaction taxes are estimated at several billion dollars annually and multinational retailers face staggering complexity at the point of sale. The Association for Retail Technology Standards, a division of the National Retail Federation, is helping retailers navigate these challenges with the new Transaction Tax Schema.

ARTS today announced the release of this new standard that will link information from transaction tax providers to a retailer’s POS system. The benefits will be harmonization of the download and publication of transaction tax rules to a retailer’s POS and/or tax calculation systems, improved accuracy of tax liability calculations and streamlined communication between the POS and tax calculation systems.

“This standard will help retailers by reducing the cost and difficulty associated with tax management,” said Richard Mader, Executive Director of ARTS. “We specifically targeted this work to greatly or even eliminate the effort associated with sales tax audits and we strongly believe the work team succeeded.”

The new standard was developed by a diverse ARTS work team which included retailers such as BJ’s Wholesale Club, El Cortes Inglés and Reebok, and suppliers such as ADP Taxware, ARS eCommerce, Clicks & Mortar, Micros Retail, NSB, Oracle, Retail Anywhere and Vertex.

“Retailers have long been challenged with meeting the requirements of national, state and local tax authorities,” said Scott Gamel, chair of the Transaction Tax work team and Sr. Associate, Tax Compliance at ADP Taxware. “An ARTS standard that connects retailers’ POS and ERP systems to transaction tax software through XML messaging will go a long way toward making their lives easier.”

ARTS Board Member and work team contributor Perry Kramer, VP, Sales Operations, Corporate and Logistics Solutions at BJ’s Wholesale Club, agreed. “Multiple compliance burdens, placed upon large transaction tax remitters like retailers, will be simplified by this robust standard,” he said. “Additionally, the standard will dramatically enhance retailers’ ability to quickly and accurately react to the ever-changing complexity of overlapping tax jurisdictions and of cross jurisdictional sale and return transactions.”

The standard is specified in XML, the data language of the internet. Anyone involved in the retail business that operates in multiple tax jurisdictions will benefit from this specification. Transaction Tax offers seamless integration with other ARTS standards such as POSlog and Price and as well as other global standards such as GS1.

The Association for Retail Technology Standards is an international membership organization dedicated to reducing the costs of technology through standards. Since 1993, ARTS has been delivering application standards exclusively to the retail industry. ARTS has four standards: The Standard Relational Data Model, UnifiedPOS, ARTS XML and Standard Requests for Proposal. Membership is open to all members of the international technology community- retailers from all industry segments, application developers and hardware companies. www.nrf-arts.org.

The National Retail Federation is the world's largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet, independent stores, chain restaurants, drug stores and grocery stores as well as the industry's key trading partners of retail goods and services. NRF represents an industry with more than 1.6 million U.S. retail companies, more than 25 million employees - about one in five American workers - and 2007 sales of $4.5 trillion. As the industry umbrella group, NRF also represents over 100 state, national and international retail associations. www.nrf.com


Superdrug Streamlines Planning Operations and Optimize Profitability with JDA Software

Superdrug, a U.K. beauty and health retailer, selects several of JDA Software's Space and Category Management solutions, powered by Intactix, to optimize item assortment and store planning decision-making throughout the retailer's 913 stores. Superdrug opted to replace its existing space planning technology. The retailer selected JDA's Space and Category Management solutions. Superdrug also implemented JDA's Efficient Item Assortment, Space Planning, Floor Planning and Intactix Knowledge Base solutions to support its strategic business objectives as the company opens additional stores throughout the U.K.

Superdrug recently licensed JDA's Space and Category Management solutions and expects implementation to be complete in six months. In addition to supporting its strategic expansion plans, Superdrug anticipates additional benefits upon deployment, including:

-Increase in overall efficiency due to reduction in manual data processing and redeployment of resources to value-added sales growth activities

-Increase in company sales through improved category management and space utilization

-Increase in sales through speed to market via support for new brand launches, new store openings and store remodels

-Reduction in inventory costs through targeted item assortment that adjusts to local demand


All Aboard Toys and Ty's Toy Box Merge

Ty's Toy Box and All Aboard Toys announce that the two companies will merge, creating a large independent toy destination for licensed character merchandise available online.

AllAboardToys.com and TysToyBox.com are responsible for launching entertainment brands and classic characters online via their toy and merchandise stores. Combined, the companies work with over 400 suppliers and more than 25 licensors and licensing agents, selling over 10,000 unique products consisting of children's licensed branded toys and toy-related products that include apparel, school supplies, home decor, DVDs, costumes, party supplies and video games.
The companies plan to continue to operate AllAboardToys.com and TysToyBox.com independently, maintaining their business operations while growing and expanding the combined entity. Colorado-based AllAboardToys.com and Northern Kentucky-based TysToyBox.com have been two of the fastest growing character based independent online toy stores over the past five years and the companies' operations will continue at their current locations.


Metro Group Grows Its Platform for Strategic Reporting and Data Analysis

Metro Group continues to expand its Teradata platform to generate analytical business intelligence. The system continuously captures and integrates detailed data from a growing number of business programs and subsidiaries across Europe, Asia and Africa. The system includes software and hardware and is supported by Teradata professional services.

For more than a decade, the Teradata platform has supported Metro's thought leadership in managing and leveraging complex information for deep business visibility and enterprise-class insight. Metro relies on it to collect and analyze a wide variety of detailed data to create powerful intelligence for decision support as well as financial reporting and customer management.

"Our international data warehouse, built on the Teradata platform, is an integral part of our corporate strategy to generate more value with targeted customer relationship management and category management in Europe and beyond," said Heinz-Josef Boeck, CEO of Metro Group Information Technology GmbH. "As our international data warehouse has been growing country by country, Teradata's highly scalable technology has proven to be of great business value, providing high performance under very demanding business circumstances. Teradata reliably handles growing data volumes while supporting mixed workloads and many concurrent users."

Presently, the international data warehouse integrates data from Metro's subsidiaries in 30 countries across Europe.

Teradata recently enhanced its customer management portfolio, adding new features and capabilities. These new features include complex offer optimization; extended access to marketing automation; simplified data import capabilities; improved reusability of campaign components and expanded Web compatibility. These new capabilities leverage Teradata's global leadership in advanced, data warehouse-driven customer management and deep expertise in marketing automation.


Lord & Taylor Selects E-Commerce Platform to Drive New Online Channel

Lord & Taylor selects iCongo's powerful e-commerce platform to drive the company's new online storefront and Internet marketing systems.

Lord & Taylor will re-launch their Internet storefront using the full e-commerce suite offered by iCongo. iCongo's e-commerce platform provides a comprehensive set of capabilities enabling retailers to operate a full featured online retail storefront. This includes streamlined order management and shipments, extensive content management capabilities, as well as sophisticated personalization and marketing tools.

iCongo's e-commerce solution will allow Lord & Taylor to enhance their merchandising capabilities, improve inventory and order tracking as well as enhance their customer's overall online shopping experience. Through the use of iCongo's advanced personalization tools, Lord & Taylor will deliver a sophisticated personalized customer experience. iCongo's easy-to-use marketing systems will also allow Lord & Taylor to simplify content creation enabling quick site updates and notifications to their large customer base.

By streamlining operations through iCongo's e-commerce system, Lord & Taylor can efficiently scale their business as the company increases its integrated marketing campaigns and focuses on strategically increasing online sales revenue.

"In searching for a new e-commerce solution partner, we looked for a proven, mature system that will enable us to effectively display our fashions, enhance both our customer's shopping experience and our overall customer service,"said Mark Weikel, Chief Operating Officer of Lord & Taylor. "iCongo's proven comprehensive e-commerce solution will allow Lord & Taylor to achieve our e-commerce objectives."

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