Dominck’s parent Safeway Inc. said lower prices drove its third-quarter profit down 5 percent, from a year ago, to $128.8 million.

Sales fell slightly, to $9.4 billion from $9.5 billion. The Pleasanton, Calif. company’s same store sales fell 2 percent, excluding fuel sales. Safeway pointed to lower prices for the same-store sales decline.

Safeway President and CEO Steve Burd said in a statement that the quarter’s earnings were in line with his expecations.

“We continue to tailor our offerings to the changing needs of our customers, with innovative consumer brand launches of Refreseh beverages and In-Kind personal care products, while offering lower everyday prices and attractive club card specials,” Burd said.

Burd added that pricing power improved during the quarter, a trend the company expects to continue through year-end.

During an earnings call with investors, Burd also warned of higher prices in store for consumers. “Because it’s been an extraordinary two-year period for retailers,” Burd said, it’s likely that grocers will pass most, if not all of the higher prices on to consumers. “Some of the manufactures will maybe pass along less than their true cost increases than worry about losing out to competing brands,” he said. But then cost increases are passed on to the retailer, and more than likely straight to the consumer.

“If  I could give you the splits on that, I’d be making money trading commodities,” Burd said. But given the prolonged recession and subsequent grocery price war, many retailers are going to have difficulty sustaining price cuts. Regional players in particular, he noted, “don’t have those kinds of resources.”