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Safeway raising prices to cover higher meat, produce costs

April 23 (Reuters) - Safeway Inc on Wednesday said it plans to boost results by passing higher costs for meat, produce and other staples on to shoppers at its U.S. grocery stores, sending shares up 1.4 percent.

Safeway, the second-largest mainstream U.S. supermarket operator, said first-quarter income was slightly below plan, in part because it wanted to remain competitive by holding back on price increases that would offset higher costs for produce, meat and pharmacy products. That decision cut into margin in the latest quarter.

"We expect to pass along most of the inflation we are experiencing" to shoppers in the second quarter, Robert Edwards, Safeway's president and chief executive officer said in a release. He did not specify how much prices would increase at stores such as Safeway and Vons.

Safeway said its first-quarter loss from continuing operations, net of tax, was $83.1 million, or 36 cents per diluted share. A year earlier, the comparable profit was $59.7 million, or 25 cents per share.

Excluding unusual items, the latest quarter's income from continuing operations, net of tax, was 6 cents per share.

Closely watched identical-store sales, excluding fuel, were up 1.8 percent during the first quarter and are currently running well above 2 percent, the company said.

Safeway has agreed to be bought by private equity firm Cerberus Capital Management in a merger valued at $9.4 billion that is expected to close in the fourth quarter. The deal will combine Safeway with Cerberus' Albertsons chain to create a dominant grocery franchise on the U.S. West Coast. It also creates a grocery network of more than 2,400 stores and 250,000 employees.

(Reporting by Lisa Baertlein in Los Angeles; Editing by Lisa Shumaker)

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