Food and drug retailer Safeway ( SWY) swung to a profit on a bottom-line basis, while its earnings from continuing operations fell year-over-year because of higher health and pension expenses and weaker sales.

In the quarter ended March 22, the Pleasanton, Calif.-based company earned $162.6 million, or 36 cents a share, compared with a loss of $367.9 million, or 74 cents a share, in the year-earlier period.

Safeway's income from continuing operations was $196.2 million, or 44 cents a share, including the effect of accounting for vendor allowances, which reduced earnings by about $10 million, before taxes. Income from continuing operations for the year-ago quarter was $325 million, or 66 cents a share. Analysts polled by FirstCall/Thomson Financial expected continuing earnings of 44 cents a share.

Sales were $7.5 billion, up slightly from $7.4 billion last year, held down by the weak economy, the company said. First-quarter 2003 comparable-store sales were flat while identical-store sales, excluding replacement stores, fell 0.5%. Excluding the effect of fuel sales, comparable-store sales fell 1.8%, and identical store sales fell 2.3% during the quarter, Safeway said.

Safeway expects second-quarter earnings to range from 47 cents to 49 cents a share and expects between $2.20 and $2.25 a share for full-year 2003. Analysts expect 51 cents a share in the second quarter and $2.22 a share in 2003.

Shares of the company were climbing 1.74% in early trading, to $16.91.