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NEW YORK CITY-Ratings firm Fitch has downgraded its outlook on both the Albertsons and Kroger supermarket companies to negative from stable and has reaffirmed its negative rating of Safeway. All three are rated “BBB.” “The negative outlook reflects the long-term pressures facing the supermarket sector and the expectation that the weakened operating results could persist,” the reports say, mentioning that discounters, dollar stores and drug retailers are competing with grocers in their sector.

The report says that the 1,747-unit Albertsons’ “market share has eroded,” but also points out that the Boise, ID-based company has tried to improve performance by selling underperforming units and investing in prototypes.

It says that Cincinnati-based Kroger, which operates 2,500 stores, has seen its operating margins declining to 6.5% during the 12 months ending May 21, down from 7.1% the year before and 8.5% in the previous fiscal year. The report does acknowledge Kroger’s same-store sales increases over the last four quarters as favorable.

Safeway, with about 1,800 stores, has had operating margin and profit declines due to competition in Southern California (where it has 16% of its store base) and other markets, the report says. However, the Pleasanton, CA-based company has benefited from the introduction of “lifestyle” stores, of which it operates 180, that focus on fresh-food, service and prepared meals.

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