Skip to main content

Albertsons Boasts Positive 3Q Results, HBA/GM 'Realignment' Plan

BOISE, Idaho - Albertsons, Inc.’s third quarter performance, released yesterday, paints the picture of a chain back on track financially after the setbacks of last year's protracted strike/lockout in Southern California, as well as the impacts of a series of destructive hurricanes in Florida.

Given the current economic and competitive environment, however, as well as the continued need to reinvest margin to grow sales and market share, the grocer said it expected profit for the year ending January 2005 to come in at the low end of its earlier forecasted range of $1.40 to $1.50 a share.

Reported net earnings from continuing operations in the quarter ended Oct. 28, rose 18 percent over the prior year, to $107 million, or 29 cents per share; however, when excluding the three cents per share net impact from the four hurricanes, earnings came to 32 cents, within the company's guidance range of 31 cents to 35 cents per share. In the prior year's third quarter, net earnings from continuing operations totaled $91 million, or 25 cents per share.

Total company sales grew 15 percent to $10.0 billion, vs. last year's third-quarter volume of $8.7 billion. Albertsons attributed the increase mainly to the sales from the new acquired New England-based Shaw’s; the acquisition of upscale retailer Bristol Farms; an increase in Southern California division sales following the settlement of the labor dispute of the prior year; and to a lesser extent, sales growth in the Florida division leading up to and following the weeks that the state was buffeted by hurricanes. Total company comparable-store sales for the quarter went up 0.3 percent, and identical-store sales rose 0.1 percent.

In a statement, Albertsons’ chairman, c.e.o., and president Larry Johnston said: "We had encouraging performance during another tough quarter for food and drug retailers, as consumer confidence declined in each month of the quarter and fuel prices continued to put pressure on discretionary income. Despite these tough conditions, we continued to focus on driving costs out of the business, differentiating our asset portfolio, reinvesting heavily in pricing and promotions to give customers a better value offering, and growing market share."

During a conference call yesterday morning, Johnston also spoke of an ongoing "multiyear consumer demand chain initiative of streamling operations and maximizing efficiency," which includes the impending transfer of health and beauty aid and general merchandise sourcing and merchandising teams to Albertsons’ store support center in Boise. "This will allow us to help maximize the efficiency and scale of our entire company, and improve the competitiveness of these important categories inside our stores," explained Johnston. The transfer of the sourcing and merchandising teams is scheduled to take place during the first quarter of 2005, he added.

Other topics during the call included the company's new seven-step strategic sourcing process, which "continues to drive benefits for the business that allow us to lower retails for the customer"; the deployment of self-checkout technology in 60 percent of food stores; the introduction of dual-branded Albertsons/Sav-on loyalty cards as well other initiatives involving the two banners, in Southern California, a strategy that has contributed to the retailer's "significantly better" recovery than its competitors in that region; the company's current contract negotiations in such markets as Northern California and Denver, which it says have reached "the halfway point;" the launch of the Albertsons' online grocery business in such markets as Salt Lake City and Palm Springs; and an advanced category business planning process that has launched a "one-team approach" to dealing with vendors.

For the third quarter, total gross profit increased $287 million to $2.8 billion, vs. $2.5 billion in the year-ago period. Gross profit as a percent of total sales declined to 27.93 percent from 28.74 percent in the same period of last year. This decrease was due to continued strategic investment in pricing and targeted promotions in key markets.

The company remained ahead of plan in its cost savings program, which began in mid-2001. Through the third quarter of 2004, more than $900 million in savings had been realized toward a cost-savings goal of $1 billion by year-end 2005, the chain said. Cash flow from operations in the third quarter grew 27 percent to $276 million, up $59 million from $217 million last year.
This ad will auto-close in 10 seconds