Grocery store operator Safeway Inc. said Thursday that weak consumer spending, the stronger dollar, lower fuel prices and the late Easter holiday caused its first-quarter profit to fall 25 percent.

The Pleasanton, Calif.-based company also lowered its full-year outlook due to the weak environment but raised its dividend.

Safeway's profit fell to $144.2 million, or 34 cents per share for the quarter that ended March 28, from $193.4 million, or 44 cents per share last year.

The results missed the company's estimate and the 40 cents per share analysts polled by Thomson Reuters had predicted.

Safeway shares fell $1.74, or 8.2 percent, to $19.74 in early afternoon trading Thursday.

"We like everybody else, are being saddled with a pretty tough economic climate," Burd said.

Revenue fell 8 percent to $9.24 billion, while analysts expected revenue of $9.86 billion.

Burd said the company was disappointed in the earnings results and blamed them on poor gross margins. He said the company invested in aggressive promotions for the Super Bowl and took other pricing measures that did not deliver as anticipated.

Total sales largely fell due to lower prices on the gasoline the grocer sells at some stores and due to a shift in the Easter holiday to the second quarter. The company also saw continued signs of the larger economic pressures on its business.

Same-store sales, a key metric for retailers that excludes sales at stores that opened or closed during the year, fell 0.7 percent, excluding fuel sales.

Safeway said it continues to offer low "everyday" prices and sales of its store brands remain strong as consumers keep spending down. Burd said the number of sales transactions increased during the quarter but the cost per item sold was down. He also said unprecedented deflation took a tool on its sales in key categories like dairy.

Frost and Sullivan research analyst Christopher Shanahan said the calendar was not favorable to Safeway, as it compared itself to a prior quarter with higher gas and food prices plus a holiday.

"If you control for all that, Safeway is still doing pretty well," he said. "They are still profitable...and they understand the remainder of this year is going to be hard."

Safeway lowered its guidance, and managers said they expect the economic slump to continue, though Burd believes Safeway is well positioned in the long-run. He said the company is focusing on both pricing and the shopping experience, in contrast with competitors focused solely on price who may not have as much to offer after the recession.

"We think when the dust settles ... Safeway is going to stand tall among American businesses," he told investors in a conference call Thursday.

The company now expects earnings of $2.10 to $2.30 per share in 2009 from previous guidance of $2.34 and $2.44 per share. Analysts expect $2.23 per share. The company also cut capital spending to $1 billion from $1.2 billion.

Safeway is raising its dividend from about 8 cents to 10 cents, payable July 16 to shareholders of record as of June 25.