Albertsons Lowers Quarter and Full-year Forecasts; Grocery Shares Fall

NEW YORK - On Thursday Albertsons became the third of the big three US grocery chains to warn that fierce competition from discounters such as Wal-Mart is forcing it to cut prices. The Boise, Idaho-based retailer said third-quarter profits were likely to be 5 percent to 10 percent below earlier guidance. It also cut its expectations for the full-year. Sales from stores open at least a year were expected to be down 2 percent, also worse than expected.

Similar warnings have already come from its competitors, Kroger and Safeway. After the news on Thursday, Albertsons shares tumbled almost 19 percent to two-year lows. The gloomy outlook wiped out more than $2 billion in Albertson's market capitalization, and sent shares of rival Kroger to close off almost 4 percent, as well as shares of Safeway Inc., which dropped 7 percent.

Albertson's said underlying earnings from continuing operations were now estimated at 47-49 cents a share against the 52 cents expected previously.

Chief executive Larry Johnston blamed "escalating competitive activity coupled with declining consumer confidence." Albertson's, he said, would accelerate cost-cutting and "invest more heavily in driving sales in the coming quarter."

Analysts say the US economic downturn is prompting shoppers not just to "trade down" to cheaper brands but to go elsewhere for their grocery staples - especially to discounters such as Wal-Mart.

Albertsons is scheduled to report its quarterly results on Dec. 9.
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