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Grocery Stocks Fall After Warning

March 11, 2004|James F. Peltz | Times Staff Writer

Stocks of the three supermarket companies in the recent California grocery strike and lockout fell sharply Wednesday, the day after two of them, Kroger Co. and Albertsons Inc., warned that their post-strike costs would contribute to lower profits this year.

The costs will include extended price cutting and other promotions aimed at regaining customers the chains lost during the strike. And this week the stores rolled out sales in force.

All three companies sent advertising mailers heralding deep, widespread sales. One mailer from Vons -- a unit of Safeway Inc., the third company hit by the strike -- was headlined "Welcome Back to Great Savings!"

The chains' problems aren't over, which prompted many investors to bail out of the shares Wednesday.

Kroger's stock dropped $1.24, or 6.7%, to $17.32; Albertsons fell $1.03, or 4.3%, to $22.88; and Safeway lost 85 cents, or 3.9%, to $20.85 a share. All trade on the New York Stock Exchange.

"They're down because investors realized that 2004 would be another year of down earnings for the group, and a lot of people owning the stocks weren't counting on that," said Andrew Wolf, an analyst at BB&T Capital Markets in Richmond, Va.

Many consumers switched to other grocery stores during the 4 1/2-month battle between the chains and the United Food and Commercial Workers union, which ended Feb. 29 when a new contract was ratified.

Now, "Kroger and the others will need to spend heavily on recapturing lost share in California," analyst Mark Husson of Merrill Lynch & Co. said in a note to clients Wednesday.

Adding to investors' skittishness was a comment from Joe Hansen, new president of the UFCW International, saying the union wouldn't rule out another strike in upcoming contract talks in regions such as Chicago and Washington, D.C.

"If Safeway comes to the table [in Washington], talking like they did in California, we'll have another strike," Hansen said in an interview with the Chicago Tribune.

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