Safeway (SWY)

NOTE H - STORE CLOSING AND OTHER CHARGES IN 2004

Operating and administrative expense in the first 24 weeks of 2004 included charges of $45.7 million of primarily store lease exit costs related to the closure of 12 under-performing Dominick’s stores. Also included in the first 24 weeks of 2004 were charges related to the settlement of the Southern California strike of $36.5 million for the contribution to the union health and welfare trust fund and $9.3 million for a contract ratification bonus.

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SAFEWAY INC. AND SUBSIDIARIES

NOTE H - STORE CLOSING AND OTHER CHARGES IN 2004

Operating and administrative expense in the first quarter of 2004 included charges of $45.7 million of store lease-exit costs related to closure of 12 under-performing Dominick’s stores. Also included in the first quarter of 2004 were charges related to the settlement of the Southern California strike of $36.5 million for the contribution to the union health and welfare trust fund and $9.3 million for a contract ratification bonus.

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SAFEWAY INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS