Safeway 1997 Annual Report Download - page 6

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our coverage ratio – operating cash flow divided by
interest expense – improved to 7.18 times in 1997 from
6.94 times the year before.
During 1997 we reduced the average interest rate
on debt by refinancing a significant portion of higher-
cost debt, entering the commercial paper market and
negotiating a new bank credit agreement.
Modernizing Stores and Support Facilities
In 1997 Safeway and Vons together invested $829
million in capital expenditures. We opened 37 new
stores, completed 181 remodels and began construct-
ing a new distribution center in Maryland. During 1998
we expect to spend approximately $950 million and
plan to open 40 to 45 new stores, remodel more than
200 existing stores and finish construction of the
Maryland distribution center.
The central focus of our capital spending program
continues to be to improve our store system within
existing markets. Replacement stores and remodels
account for the majority of our capital investments.
For further growth, we will consider other acquisitions
outside our operating areas.
Vons Consolidation Ahead of Schedule
Largely as a result of the “can do” attitude of transition
team members from both companies, we are well
ahead of schedule in integrating the Vons operation
into Safeway. We have already realized substantial
synergistic benefits from the merger and anticipate
more going forward.
Review and Outlook
It has now been five years since the current manage-
ment team began working to turn around a company
that was struggling with high costs, sluggish sales
and inadequate returns on invested capital. In 1992
Safeway was an industry laggard, trailing its peers in
almost every key measure of operating and financial
performance. Today it ranks among the best.
During the last five years, the price of a share of
Safeway stock has grown at an average annual rate of
58%. As shown on the chart on page 2, $1,000 invested
in Safeway stock at the beginning of 1993 had increased
in value to more than $9,730 by the end of 1997. We
believe our efforts to execute the growth strategy outlined
on the following pages are paying off. With the ongoing
support of 147,000 Safeway employees, who have
helped create our past success, we hope to continue to
add value to your investment in 1998 and beyond.
We are committed to growing our business for our
customers, our employees and our stockholders.
Steven A. Burd
President and Chief Executive Officer
February 27, 1998