Safeway Inc. reported Tuesday that profit slipped in the third quarter, weighed down by charges related to the restructuring of its Texas operations.

The Pleasanton-based owner of Vons and Pavilions reported net income of $122.5 million (27 cents per diluted share) for the third quarter ended Sept. 10, compared with $159.2 million (35 cents) a year earlier.

Revenues rose 7.2 percent to $8.9 billion from $8.3 billion in the comparable quarter of the prior year, led by increased fuel sales and a new marketing strategy. Comparable store sales increased 5.7 percent in the third quarter.

Analysts had expected a third-quarter profit of 35 cents per diluted share on revenues of $8.7 billion.

The company's third-quarter results were reduced by 8 cents per diluted share due to an impairment charge related to under-performing stores in Texas and by 3 cents per share for an employee buyout charge in northern California. Safeway plans to close 26 of the under-performing stores in Texas and expects to incur a charge of approximately 8 cents per diluted share as a result in the fourth quarter.

Safeway estimates that higher energy costs reduced net income by approximately 3 cents per diluted share, while the resolution of various tax issues increased net income by 6 cents per diluted share.

Safeway made no mention of the 4 & #733;-month labor dispute at its southern California stores that was resolved in early 2004. Safeway along with Kroger Co.'s Ralphs and Albertsons Inc. are struggling to bring back customers lost during the strike.

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