Albertsons Results Disappoint

For the fourth quarter, the company earned net income of $186 million, or 50 cents per diluted share, compared with $129 million or 35 cents per diluted share in the previous year's fourth quarter. Fourth quarter sales totaled $11billion, compared to $9 billion for the fourth quarter 2003. The increase in total sales was primarily due to the acquisition of the Shaw's chain, the progress in recovery from the Southern California supermarket strike, and the impact of a new national merchandising program.

Johnston said that negative impacts on the company's earnings included costs of 1 cent per share from additional costs associated with the Floridahurricanes and 1 cent per share for charges due to changes in the company's accounting method for leases. In addition, the company's quarterly and annual results both reflected an extra week in fiscal 2004 versus fiscal 2003. For the year, Albertsons earned $474 million, or $1.28 per share, compared to $1.51 per share in fiscal 2003, on sales that totaled $40 billion versus $35 billion for fiscal 2003. The full year's earnings showed a cost of four cents per share for the impact of the hurricanes.

Despite the increases in quarterly and yearly earnings, "We missed our earnings targets and that is unacceptable," Johnston said. Among the disappointments he cited were "tougher competitive pressures than anticipated in some of our markets, with many competitors spending excessively to drive top line sales." Probably the most competitive geographic area was Dallas/Fort Worth, but Southern California has also proved costly of late as Albertsons has worked to recover market share that it lost during the supermarket strike.

Johnston expressed optimism that the recovery of market Share in Southern California, coupled with a new labor contract in the region, "positions our Company for success in 2005 and beyond in America's largest retail marketplace." He also spoke of the potential for expansion of the Shaw's and Bristol Farms chains that Albertsons acquired in 2004, and through Extreme Inc., a separate division that the company launched last year to operate deep discount stores under the name Super Saver.

Commenting on Bristol Farms and Shaw's, Johnson said, "We believe that both of those formats have legs. We like having these formats in our toolbox now so that, along with our drug business, we can bifurcate or trifurcate markets instead of sitting in one spot with a conventional combination grocery store."