Safeway sales hold up despite bid battle

The takeover battle for Safeway was blamed for a small dip in fourth-quarter sales yesterday, although the supermarket group confounded City fears of a much sharper fall.

In a trading update, Safeway said like-for-like sales for the January to March period fell 0.1 per cent against a year earlier after adjusting for the late Easter. This compared with a gain of 0.1 per cent in the third quarter. Analysts had expected a decline of up to 2 per cent.

The group also revealed that it had clocked up £17m in professional advisory fees relating to the five-way bid frenzy that kicked off in January.

Simon Laffin, the finance director, blamed the fall in sales on the uncertainty surrounding the group's future. He said suppliers were unwilling to give Safeway deals that might embarrass them depending on the group's eventual new owner. "Suppliers are nervous, particularly if Wal-Mart wins," Mr Laffin said. Wal-Mart's Asda, J Sainsbury, Tesco, William Morrison and the retail entrepreneur Philip Green are vying to snap up the chain.

Safeway estimated that pre-exceptional pre-tax profits would come in at the bottom of City expectations, at about £335m for the year to 29 March. It said it would take an exceptional charge of £20m to cover advisory fees and loyalty bonuses worth £6m, which it has used to retain staff.

Only Mr Green is free to launch a formal bid for the chain, with the other four forced to wait until August to hear the outcome of an in-depth regulatory investigation.

Safeway said actions such as slowing a store revamp programme and taking a "more cautious" approach to investment in large-scale projects would limit the damage to short-term profits. It said like-for-like sales in the year-to-date were 1 per cent ahead.

Shares in Safeway slipped 2p to 261p.