Labor Dispute Dampens Albertsons Q2 Performance, 3Q Outlook

BOISE, Idaho - Citing the residual impact of the Southern California labor dispute, Albertsons, Inc. reported lower second quarter profits yesterday and provided guidance for the current quarter that fell below Wall Street forecasts.

The nation's second-ranked supermarket chain, which operates 2,500 stores under the Albertsons, Jewel-Osco, and Acme Markets banners, among others, said sales reached $10.2 billion for the quarter versus last year's second quarter sales of $9.0 billion. This increase was due primarily to sales volume from the Shaw's acquisition, but was partially offset by the effects from the Southern California labor dispute, which the Company estimates negatively impacted total sales by approximately $182 million and cut earnings by 13 cents a share.

In the second quarter ended July 29, Albertsons' profits fell to $125 million, or 34 cents a share, from $162 million, or 44 cents, a year earlier. The company said the decline in quarterly profits were attributable to heavy promotional activity to stimulate sales at its Southern California stores after the protracted strike ate into its profits.

Same store sales for the quarter (including the continued effects of the Southern California labor dispute) declined 1.3 percent while total "identical" store sales, which include new or replacement stores, declined 1.5 percent. Excluding the Southern California stores involved in the labor dispute, total comp store sales for the quarter increased 0.2 percent and identical store sales were flat. Comparable and identical store sales will not include the Shaw's stores until the second quarter of 2005.

Albertsons also contributed an additional $7 million to two Northern California health and welfare union plans, which it said reduced earnings by a cent a share. The chain's exits from the Omaha and New Orleans markets also reduced net earnings by 6 cents a share due to non-cash impairment write-downs from the sale of property and equipment.

Commenting on the quarterly results, Larry Johnston, chairman, c.e.o., and president, said in spite of a challenging environment that existed for all retailers during the last quarter, "We continued to make progress on a number of key initiatives. Comparable store sales continued to grow outside of Southern California and we are very pleased to report that in our Southern California division, we have retained and recovered more of our business than originally anticipated, keeping us ahead of our plans there for both sales and profitability."

Johnson said the company also continued making progress to improve its total asset portfolio during the quarter, pointing to its acquisition of Shaw's and the Omaha market exit. "On the labor front, I am pleased to report that following quarter-end, we successfully renegotiated new labor contracts covering 19,000 associates in four of our divisions, which will help to significantly improve our future competitiveness in these important markets."

During the month of August, the company settled labor contracts covering 19,000 associates.
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