Albertson’s Reassures Investors

Jun 13, 2002

In an effort to calm nervous investors after Safeway’s announcement sparked a sell-off in shares of supermarket operators, Albertson’s says that it is on track to achieve its second-quarter and 2002 profit targets. The second-largest U.S. supermarket chain anticipates savings from a recent restructuring to help lift sales and underpin profitability, reports Reuters.

Albertson’s offered a similar outlook on June 5 when it posted a first-quarter loss, hurt by expenses to close unprofitable stores and lower prices to compete with Wal-Mart. The statement also follows Merrill Lynch’s change of its mid-term rating on Albertson’s from “buy” to “neutral,” stating that the chain may be forced to spend its savings on staving off competition instead of bolstering earnings.

Analyst Mark Husson says he admires the retailer’s cost-cutting moves, unprofitable store and market exits and beefed-up technology. He believes, however, that Albertson’s may face tougher times as rivals Safeway and Kroger increase promotional activity in the second half of 2002. “Some of Albertson’s savings will have to be spent defending market share instead of boosting earnings,” Mr. Husson says, identifying the company as the most expensive of the large food retailers.

Moderator Comment: What ails Albertson’s? What is
the cure?

Albertson’s is on the defensive, retreating from markets
it can’t compete in and focusing on areas where it is strong but under intense
pressure from supermarket, supercenter and warehouse club rivals.

Wall Street’s expectations aside, the chain needs to
develop an identity beyond being just another big box offering one-stop shopping

  1. A retailer’s name is its brand.

  2. A brand is a promise.

  3. What can Albertson’s promise that others can’t or
    won’t promise to deliver on?

Anderson – Moderator

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