Albertsons Posts Lower 4Q Profit, Changes Vendor Allowance Reporting Method

BOISE, Idaho - Food and drug retailer Albertsons Inc. today reported lower fourth-quarter profits as it battled falling sales and fierce competition. The retailer also announced that it has changed the timing on how it accounts for vendor allowances.

Net earnings for the quarter ended Jan. 30 totaled $205 million versus $290 million last year.

Quarterly sales totaled $9.1 billion versus $9.3 billion in last year's fourth quarter, while comparable store sales declined 0.8 percent. Identical store sales fell 1.2 percent. This was an 80 basis point improvement versus third quarter 2002 results, the company reported.

Albertons' gross profit margin fell during the quarter to 28.56 percent from 28.88 percent, and Chief Executive Larry Johnston said that was a strategic decision aimed at boosting sales.

"One of the criticisms that had been made of us was we weren't being aggressive enough in the marketplace," Johnston told Reuters. "We invested a significant amount of gross margin during the quarter to turn those sales trends."

"We had great acceptance by consumers. Our average baskets (the amount customers spend during a visit) were up from $24.50 in the fourth quarter of last year to $24.93 in the fourth quarter of this year," Johnston said.

Albertsons said it has changed the timing on how it accounts for vendor allowances, the promotional rebates that have lately been the source of accounting scandals at several food distributors and retailers, including Dutch supermarket operator Ahold.

Albertsons said that under the new method, the allowances will be recognized when the related goods are sold. The new method reduced fourth-quarter net profit by $6.1 million and increased full-year profit by $3.4 million, excluding the effect of a one-time adjustment.

The company has been aggressively cutting costs and said it has already slashed $446 million out of a total goal of trimming $750 million by the end of 2004.

Looking ahead, Albertsons said identical store sales will likely be positive by the end of the year.

Albertsons operates retail stores in 30 states, under banners that include Albertsons, Jewel-Osco, Acme, Sav-on Drugs, Osco Drug, Albertsons-Osco, Albertsons-Sav-on, Super Saver and Max Foods.
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