Wednesday, July 18, 2001 | 11 a.m.
SUN STAFF AND WIRE REPORTS
Supermarket giant Albertson's Inc. said it plans to close 165 underperforming stores in 25 states. However, the company declined to say this morning if Southern Nevada's 28 grocery stores or 38 stand-alone Sav-on drug stores would be affected.
Albertson's and Sav-on drug stores employ about 2,000 Southern Nevadans, according to a spokesman for the United Food & Commercial Workers Local 711.
About 25 percent of the outlets closed in the next 12 months would be the stand-alone drug stores, an Albertson's spokeswoman said.
Albertson's chairman and chief executive Larry Johnson said in a statement the cuts are aimed at reducing operating expenses and reallocating capital. Those efforts include eliminating 15 to 20 percent of its managerial and administrative jobs.
"The major reduction in force we are announcing today is primarily aimed at corporate overhead outside our stores, resulting in a significant number of permanent layoffs of corporate and certain distribution center office associates," Johnson said in the statement.
Albertson's is the nation's second-largest food and drug retailer, which has struggled to digest its 1999 acquisition of American Stores, the former parent company of Lucky grocery and Sav-on drug stores.
Albertson's took over the 26 Lucky stores in Southern Nevada in 1999 and renamed them Albertson's, and the 19 previously existing Albertson's in the Las Vegas Valley were sold to Raley's Supermarkets.
The Federal Trade Commission forced the sale of the 19 stores and others in California and New Mexico so that Albertson's would be in compliance with federal antitrust law.
The American Stores acquisition more than doubled the number of Albertson's-owned outlets to more than 2,500 in 36 states. Johnson, a former General Electric Co. senior executive with a reputation of ironing out acquisition problems, came on board in April.
Albertson's reported a 4 percent increase in first quarter profits last month, meeting Wall Street expectations. It posted net income of $186 million or 46 cents per share on $9.3 billion in sales for the 13 weeks through May 3. Johnson announced at the time that the "major roadblock in the 1999 American Stores Company merger are behind us."
But this morning, the company announced targeted job cuts.
Ertharin Cousin, Albertson's senior vice president for public relations and government affairs, said the exact number of job cuts had not been determined.
The company also would not detail where store closures would occur because the process would begin in the third quarter and continue for 12 months, Cousin said.
She also said the company was reluctant to release a particular store's closure too early, fearing that the announcement may hurt the store's sales as customers begin looking for alternatives.
Albertson's said it would offer a voluntary separation program to administrative and managerial personnel with 20 or more years of continuous service. Laid-off employees would be offered a severance package, including job placement services, the company said.
Albertson's said it expects to take a charge of about $585 million before taxes, including $550 million in the second quarter, to cover the cost of the restructuring plan. But the personnel cuts alone are expected to reduce costs by $100 million a year.
"Because these actions impact our associates, the decisions announced today are not easy; however, in this increasingly competitive industry, reducing our operating costs is a necessary step in ensuring our company's long-term success," said Peter Lynch, who became president and chief operating officer of Albertson's after the merger.
In addition to the personnel cuts and closure of stores identified as underperforming, Lynch said division offices would be consolidated and Albertson's would dispose of some surplus property.
However, Johnston said Albertson's "growth momentum" should continue despite the store closures, through improved sales in existing stores, new store openings and "strategic 'fill-in' acquisitions." He said the company expects to reach $38 billion in annual revenues this fiscal year.
"Further, we are becoming increasingly confident that over the next year we will achieve our expense reduction goal of $250 million," he said.
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