Albertson’s, Sav-On owner struggles with acquisition, misses profit expectations

Tuesday, Dec. 5, 2000 | 11:10 a.m.

SUN STAFF AND WIRE REPORTS

Vons owner

Safeway Inc., owner of the Vons grocery stores in Las Vegas, today announced plans to buy East Coast store operator Genuardi's Family Markets, Inc.

Terms weren't disclosed. Genuardi's operates in Pennsylvania, Delaware and New Jersey.

After the acquisition, Safeway will operate more than 1,700 stores in 21 states in the United States and in Western Canada, with annual sales of about $33 billion and more than 200,000 employees.

BOISE, Idaho -- Albertson's Inc. missed analysts' earnings estimates for the third quarter and lowered its own expectations for the fourth quarter.

Net income for the quarter ending Nov. 2 was $172 million, or 41 cents per share, roughly 33 percent higher than the $130 million, or 31 cents a share, earned a year ago.

Excluding merger costs and one-time charges, the Boise-based chain's third-quarter income rose to $187 million, or 45 cents a diluted share, from $185 million, or 44 cents a share, a year earlier. Analysts surveyed by First Call/Thomson Financial had expected quarterly earnings of 48 cents a share.

"While we have seen some improvement in key areas, overall we are very disappointed with our quarterly results," Chairman Gary Michael said Monday.

"However, we remain focused on three key objectives: increase sales, reduce expenses and increase return on capital. We have developed a very solid strategy to meet these objectives and regain our momentum in sales and earnings."

Albertson's has finished its acquisition of the Acme chain, Michael said.

Albertson's has struggled with earnings and sales lately, a combination of a difficult retail environment, competition from other one-stop stores and integrating American Stores into the company, said analyst Robert Toomey of Dain-Rauscher.

In Las Vegas, Albertson's picked up the Sav-On drugstore chain and the Lucky grocery stores with the American Stores deal. The Lucky stores were converted to the Albertson's brand.

Albertson's, which operates more than 2,500 retail stores in 36 states, earlier this fall announced its intentions to slash operating and interest expenses by $250 million and reduce capital expenditures by $500 million over the next few years.

Sales for the third quarter rose to $8.99 billion fro $8.98 billion a year ago.

Albertson's said it expects to report fourth quarter earnings, excluding merger costs, of about 50 cents a diluted share, below analysts expectations of 75 cents a share, because of slowing sales.