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Albertson's Cuts Earnings Forecast for Year

June 06, 2003|From Bloomberg News

Albertson's Inc., the No. 2 U.S. supermarket chain, posted a less-than-expected fiscal first-quarter profit Thursday and cut its earnings forecast for the year because it boosted promotions to win shoppers lost to warehouse stores and mass merchants.

The Boise, Idaho-based company plans to offer more discounts and raise spending on marketing, Chief Executive Lawrence Johnston said in an interview. Albertson's shares tumbled 12%, dragging down the stocks of rivals Kroger Co. and Safeway Inc.

Albertson's cut prices and increased advertising in the quarter to keep customers from defecting to discounters amid slower consumer spending, said Johnston, who began running the company in April 2001. Albertson's, which has closed about 400 stores since then, is trying to reduce costs to keep prices competitive as Wal-Mart Stores Inc. enters more of its markets with outlets carrying food items.

"There's a change in the landscape because of Wal-Mart and its supercenters," said Andrew Wolf, an analyst at BB&T Capital Markets, who rates Albertson's a "hold" and doesn't own the stock. "Wal-Mart has a major pricing advantage."

Albertson's expects profit this year of $1.70 to $1.75 a share. The retailer, which also slashed its earnings outlook in October, forecast annual profit of $2.08 to $2.13 in March.

Shares of Albertson's fell $2.64 to $19.18 on the New York Stock Exchange. Kroger, the No. 1 U.S. grocer by sales and owner of the Ralphs chain, fell 78 cents to $15.82; Safeway, owner of Vons, dropped 64 cents to $19.05. Both also trade on the NYSE.

Albertson's had net income of $172 million, or 47 cents a share, for the first quarter ended May 1, contrasted with a loss of $165 million, or 40 cents, a year earlier. Analysts surveyed by Thomson First Call had expected profit of 50 cents a share.

Sales rose less than 1% to $8.94 billion, with sales at stores open at least a year falling 0.9%.

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