Safeway follows rivals with discount drive

The supermarket chain is offering more discounts after seeing sales surge at its stores.

Prices of products included in a series of weekly promotions will be reduced even further, the chain said.

The move comes two weeks after rival grocer Asda launched a wave of price cuts worth £100m. Tesco has also vowed to save its customers an extra £60m on 700 items.

Safeway said sales in the first quarter were 6.3 per cent up on the same period last year, with double-digit increases at refurbished stores.

The chain is revamping its supermarkets, with new fresh food counters and extra features such as dry cleaning and photo processing centres.

Like-for-like sales, which strip out income from new stores, were up 6.1 per cent in the trading period - the first 12 weeks to June 23.

Safeway chief executive Carlos Criado-Perez said the chain had made a strong start to the year. "Our new format stores are working well. We are making great progress with our ranges, particularly in fresh foods and we are accelerating our investment in reducing prices."

The £120m savings drive was a budgeted investment paid for by strong sales which would "make Safeway's shopping basket even cheaper", he said.

The Safeway campaign follows claims by investment bank ABN Amro that the store's prices were 12 per cent higher than those at Asda, and 11 per cent dearer than Tesco.

Mr Criado-Perez dismissed the report and said wider studies of the market showed Safeway was in line with Tesco and "considerably cheaper" than Sainsbury's. ABN's study did not reflect the breadth of Safeway's discount strategy.

Mr Criado-Perez launched the weekly promotions when he took over the hot seat at the end of 1999.

The chain says a million extra shoppers have become Safeway customers since the campaign began, taking its customer base to 11 million.

Mr Criado-Perez added many people were now using Safeway as their primary store rather than cherry-picking the cheap products