Analyst: Gina Tedesco & Morgan PhillipsOctober 29, 2009

One of largest food and drug retailers Extensive network of distribution, manufacturing,

and food facilities. Provides value to customers by maintaining high

in-store standard and wide selection of high quality produce and meat at competitive prices

Has 1,739 stores (West coast and Canada) Sales of $44.1 Billion in 2008 Fortune 50 company Map

Continued… Key ingredient of success is introduction of most

extensive private label programs in North America. 3,000 products including Safeway, Lucerne and

Mrs. Writes. Additional 1,250 premium products (SELECT Label) Safeway also holds a 49% interest in Casa Ley,

S.A. de C.V., which as of June 18, 2009, operated 149 food and general merchandise stores in Western Mexico.

Current Price 22.62 52 week range 17.19- 22.32 Beta: 0.72 Market Cap 9.19B P/E 11.25 PEG 1.42

(SWY) Summary

Headlines

•5 Stocks With Big Insider Buying Posted: Oct 27, 2009 15:44 PM by Aryeh Katz-October 20,2009, director Michael Shannon bought 6200 shares of the company for roughly $143,000.

•Safeway Inc. Announces Third Quarter 2009 Earninghttp://www.safeway.com/IFL/Grocery/Investors - iframetop

•Safeway Launches Annual Company wide Breast Cancer Fundraising Campaign

•Safeway Inc. Names Joseph Ennen Senior Vice President, Consumer Brands

EPS Growth Estimates

Finance.yahoo.com

2 Year Stock Chart (SWY Compared to S&P)

Net Income ($ Millions)• TTM- 849.5• 2008-965.33• 2007-888.4• 2006-870.60• 2005-561.1• 2004-560.2• 2003-(169.8) • 2002-(828.1) • 2001-1253.9 • 2000-1091.90 • 1999-970.9

Intrinsic Value (Morningstar) Current Price: $22.32 Fair Value Estimate: $30.00 Consider Buying: $21.00 Consider Selling: $42.00

Morningstar: 4 Star Rating Insider Ownership is increasing

S.W.O.TStrengths

• 3rd largest supermarket chain• Offers an upscale range of

products including their own• Brand repositioned in 2005 to

differentiate itself from competitors and increase brand involvement

• Addition to product line: Fuel• Trading lower than intrinsic

value• Created brand loyal and

brand value customer base• Stable management• “Lifestyles” stores generate

higher sales

Weaknesses• Higher prices• High debt from the “lifestyles”

project• Renovated stores are

expensive to maintain• Food retailing sectors are

extremely price competitive

S.W.O.T (Continued…)

Opportunities• Product line expansion• Enter new regions of the

country

Threats• Competitors- Tesco, Wal-

mart, Krogers, SuperValue, Whole Foods, Costco

• Invested too much into creating a welcoming atmosphere

• 80% employees are in the union (Fear of Strike)

Recommendation

“In this difficult economy, we are working diligently to lower costs and meet the needs of our customers with high quality products, lower everyday prices and attractive club card specials,” Steve Burd (Chairman, President, CEO)

Present Proctor & Gamble Purchase half of what we need to meet our criteria