Safeway sales - for up read down

A CHANGE in Safeway's accounting reveals its sales are much worse than first thought. The supermarkets chain has been forced to offer lots of 'multi-buy' discounts to stop shoppers from going elsewhere.

Last month, Safeway trumpeted its resilience despite 10 months of takeover uncertainty. It reported a 0.7% rise in second quarter like-for-like sales, pleasantly surprising compared to the 0.2% fall at Sainsbury.

But now Safeway admits that underlying sales were actually down 1.6%, if measured on a similar basis to rivals Tesco, Sainsbury and Morrison.

Safeway had included items that were given away in promotions - such as buy-one-get-one-free offers. If further adjustments for mobile phone top-up cards are included, sales were down 2.1%.

Safeway's finance director Simon Laffin brushed off the change. He said: 'This is trainspotter's stuff.' One analyst retorted: 'This is all very well, but they are the only train running on this type of track.'

Laffin acknowledged other supermarkets chains account in a different way, but insisted: 'I don't think our way was wrong.'

The sales revision does not affect profit or cash, nor will it deter bidder Morrison, which wants the store sites. But it does highlight Safeway's relative underperformance.

Another analyst said: 'Good job they are not going to remain independent for long. Multi-buys are like a drug - the more you offer, the more you need to offer.'

Safeway said first-half pre-tax profits rose 12% to £160.2m, but fell 7% if one-off charges are excluded. The dividend was held at 3.05p.

Laffin is 'frustrated' that the bid process is taking so long. He pointed out that bids for 39 of the 53 stores that Morrison will sell are 'comfortably in excess of ' their £543m valuation. Expect a formal Morrison bid before Christmas.