Albertson’s stock slumps on disappointing earnings

Tuesday, Nov. 30, 1999 | 11:03 a.m.

Albertson's Inc., one of the largest grocery store operators in the Las Vegas Valley, reported a significant plunge in quarterly earnings today.

The Boise, Idaho, store operator reported earnings of $129.9 million, or 31 cents per share, for the quarter ending Oct. 28. That's a decline of more than 40 percent from the year-ago quarter.

Analysts had expected earnings of 59 percent for the quarter. The 47 percent miss sent Albertson's stock into a tailspin -- as of late morning on Wall Street, Albertson's was trading at $30, down $5.81 -- a 16.2 percent decline.

Despite the earnings decline, sales rose 1.6 percent during the quarter, to $9 billion.

Earnings were driven down significantly by a $37 million settlement announced by Albertson's today that will result in the dismissal of eight class-action lawsuits combined in Boise federal court. The lawsuits alleged Albertson's employees had been forced to work "off-the-clock."

After taxes, the settlement cost Albertson's $22 million, or 5 cents per share for the October quarter.

Gary Michael, chairman and chief executive of Albertson's, also blamed costs associated with the company's acquisition of American Stores Co., and the court-ordered divestiture of 145 stores that followed. Albertson's said it recorded $56 million in merger-related costs during the quarter.

"This was a tough quarter," Michael said. "While we are disappointed with our earnings and with the short-term cost of the merger and integration, we are confident that the long-term picture remains very positive. We still have a lot of work to do over the next six to 12 months, but we are more convinced than ever that the new Albertson's is positioned for long-term success."

Albertson's also absorbed a $90 million pre-tax charge during the quarter from the conversion of 400 stores in California, Nevada and New Mexico to the Albertson's name.

The company projected fourth-quarter earnings of 70 cents per share, before merger costs. It estimated 2000 earnings will reach $2.70 per share, a 21 percent increase over 1999 projections.

The merger of Albertson's and American Stores gave Albertson's 47 stores in the Las Vegas Valley, operating under the Albertson's and Lucky brand names.

But with the court-ordered divestiture, Albertson's sold off its 19 Albertson's stores in Las Vegas to Raley's. The company then converted its 28 Lucky stores back to the Albertson's name in November.

Albertson's also owns 29 Sav-On drugstores in the Las Vegas Valley, which it acquired in the American Stores merger.