July 17 (Bloomberg) -- Safeway Inc., the third-largest U.S. supermarket chain, fell the most in more than five years in New York trading after revising its 2008 sales forecast for existing stores as people bought cheaper brands or shopped elsewhere.

The company predicted that sales at stores open at least a year would increase 1 percent to 2 percent in 2008. In April, Safeway said those sales would climb 2.3 percent at most, down from its February growth projection of 3 percent to 3.2 percent. The company reaffirmed its full-year profit forecast.

Chief Executive Officer Steven Burd said today on a call the chain had a ``slight tick down'' in market share for the first time in about 13 quarters as people shopped at discounters because of gasoline topping $4 a gallon and higher food prices. Same-store sales in the quarter ended June 14 fell 0.3 percent, excluding fuel, as people bought less expensive Safeway brands.

``I don't think any of us feel the economy is going to improve any time soon, at least not consumer confidence,'' Burd, 58, said on the call. ``In a soft economic environment, people who have been selling price and value, they're going to do better.'' Burd didn't identify which companies gained sales.

Competitors' Approaches

Bigger grocery chains Kroger Co. and Supervalu Inc. have cut prices to lure shoppers that have limited spending and car trips to save on fuel costs. Wal-Mart Stores Inc., the world's biggest retailer, said July 10 that sales at existing stores climbed 5.8 percent in June, the largest increase in four years.

Safeway dropped $3.23, or 11 percent, to $26.78 at 4:15 p.m. in New York Stock Exchange composite trading, the biggest decline since April 16, 2003. The shares lost 22 percent this year. Kroger gained 9.2 percent, Supervalu retreated 17 percent, and Wal-Mart climbed 21 percent in that same period.

Second-quarter revenue from its 1,740 locations in the U.S. and Canada increased 3 percent to $10.1 billion, Pleasanton, California-based Safeway said today in a statement.

Safeway said profit rose 7.4 percent, helped by higher fuel sales at its more than 360 gasoline stations. Net income climbed to $234.3 million, or 53 cents a share, from $218.2 million, or 49 cents, a year earlier. Profit beat the average analyst estimate in a Bloomberg survey by 1 cent.

The chain said it would earn $2.25 to $2.35 a share for the year ending Dec. 27.

To contact the reporter on this story: Mark Clothier in Atlanta at mclothier@bloomberg.net

Last Updated: July 17, 2008 16:22 EDT