March 8, 2011 / 3:20 PM / 6 years ago

UPDATE 1-Safeway predicts sales growth, to pay down debt

* Safeway sees FY EPS $1.60-$1.80 before adjustments

* Sees identical-store sales up 1-1.5 pct this year

* Shares up 0.5 pct

CHICAGO, March 8 (Reuters) - Safeway Inc SWY.N forecast 2011 earnings that could top Wall Street's expectations as it predicted key sales would rise, and it said it plans to pay off $600 million of U.S. debt and buy back shares with funds from its Canadian business.

The grocer said its board approved a $1.1 billion dividend from Canada to the United States. The first $600 million installment should be paid in the first quarter, with cash on hand, and the second $500 million should be paid in the second quarter, mainly with new borrowings, it said.

Safeway said Tuesday it expects to earn $1.60 per share to $1.80 per share this year, before adjustments related to the Canadian dividend. The average analyst forecast is $1.67, according to Thomson Reuters I/B/E/S.

The company expects identical-store sales, excluding fuel, to increase 1 percent to 1.5 percent.

Identical-store sales are a key gauge of performance for grocery stores and at Safeway include established supermarkets that have not been significantly renovated or replaced. Such sales fell 0.8 percent in the fourth quarter. [ID:nN24243347]

Shares of Safeway, which is holding an investor conference, were up 0.4 percent at $21.68 in morning trading. (Reporting by Jessica Wohl, editing by Gerald E. McCormick)

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