This was largely due to the profits warning in February when the group had drawn attention to a steady decline in both sales growth and food price inflation.
With both Tesco and Sainsbury posting market share gains and like-for- like sales increases since then, analysts were wondering whether these gains were at Safeway's expense.
Yesterday's full-year results showed this not to be the case. Profits of pounds 420m were in line with admittedly reduced expectations, but, more importantly, like-for-like sales were up by 4.7 per cent in the year and by 3.7 per cent in the six weeks since the 29 March year-end.
Market share also edged up from 7.5 per cent to 7.8 per cent over the 12 months. The numbers pleased the City and the share price breathed a huge sigh of relief, jumping 23.5p to 354.5p.
Management proudly boasted that Safeway had reached its pounds 15 sales per square foot target a year early and that it was increasing its share of higher-spending family shoppers which all the supermarkets are targeting. In addition, the proportion of customers who use Safeway for their main shop, as opposed to their secondary top-up option, rose from 23.6 per cent to 25 per cent last year.
There were also encouraging signs on margins, which rose by 0.1 percentage points, and on further technological initiatives such as self-scan- ning. This is to be rolled out to 165 stores by the end of the current year.
Of course it should be remembered that on many measures Safeway is still lagging behind its rivals. Asda has pushed it from third to fourth in market share in the last two years. In sales per square foot, Safeway's pounds 15 figure compares to pounds 20.75 at Sainsbury pounds 19.85 at Tesco and pounds 16.40 at Asda.
And Sainsbury's and Tesco's proportion of primary shoppers is well over 30 per cent.
For historical reasons, Safeway has poorer locations with fewer large out-of town-stores, while the perception lives on that its prices are more expensive.
All this appears to counsel caution about the group's prospects. After all, there has long been an argument that the big four supermarkets cannot all prosper at once.
That, however, may no longer be true. There is growing evidence that it is the division two supermarkets such as Kwik Save, Iceland and the Co-op which are struggling.
Safeway's shares have bucked negative sentiment before: they virtually doubled between 1994 and 1996. Since the warning, they are again looking oversold and could start to make progress. On forecast profits of around pounds 440-pounds 460m they trade on a forward rating of 12. Worth holding.