Albertson’s, Inc. (NYSE:ABS – news) today announced preliminary results for its second quarter of fiscal 2000, which ended August 3, 2000. The Company reported that due to lower than projected comparable store sales increases and higher than projected operating expenses the Company expects to report diluted earnings per share of approximately $0.50, excluding merger-related costs. Diluted earnings per share including merger-related costs are expected to be approximately $0.46. Total sales for the quarter, reached $9.2 billion, a 4.6% increase over the second quarter last year excluding divested stores’ sales. Identical store sales increased 1.2% and comparable store sales (which include replacement stores) increased 1.4%.
Lower than projected earnings can be attributed primarily to a decline in comparable store sales in July and an increase in selling, general and administrative expenses. While the Company’s California stores made some progress this quarter, other key markets are experiencing significant market entry activity by competitors, resulting in an irregular pricing environment.
Peter Lynch, president and chief operating officer, said, “We are not satisfied with our results in the second quarter and we have taken the necessary steps to address these operating issues. We have put programs in place to enhance our $37 billion annual sales base. We are focusing on the execution of our sales initiatives, including a renewed focus on the center of the store. In addition, we have established a renewed culture of thrift. We will reallocate resources to ‘right-size’ the Company with a goal to reduce selling, general and administrative expenses by $250 million in 2001 and capital expenditures by $500 million over the next two and a half years. We firmly believe that a focus on these key areas will enable us to achieve stronger sales and earnings.”
The Company continues to realize significant benefits from its 1999 American Stores Company merger. These benefits include: a variety of retail formats, a national presence, a talented workforce and a combined Company with strong cash flow and among the highest profits in the retail food and drug industry. Integration of the Company’s Acme chain is on schedule and progressing smoothly.
The Company’s working capital reduction program continues to be successful. Total debt excluding capital leases has been reduced by over $430 million year to date and over $160 million this quarter alone. The Company also purchased and retired 2,196,000 shares of its common stock during the second quarter at a total cost of $72.5 million, or an average of $33.02 per share. Year to date the Company has purchased and retired 2,893,000 shares at a total cost of $95 million and an average share price of $32.84.
“We are focusing on sound long-term planning. Accordingly, following a thorough discussion, our Board of Directors has authorized us to invest gross profit to drive sales. As a result, we expect diluted earnings per share for fiscal year 2000, excluding merger-related costs, to be even with or slightly higher than 1999’s diluted earnings per share of $2.26,” said Gary Michael, chairman and chief executive officer.
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“July was a tough month for us and the remainder of the year looks like it will be just as challenging. But we believe that we have the right plans and the best people in our industry to build sales in every market, reduce spending, consider ‘thrift’ as a way of life, and continue to provide the best service and value to our customers,” Mr. Michael concluded.
During the second quarter the Company opened 17 combination food and drug stores, 1 conventional store, 6 stand-alone drugstores, 16 fuel centers and completed remodels on 13 supermarkets and 1 drugstore. The Company, during the quarter, closed 7 drugstores, 1 of which was replaced with a larger store, as well as 16 supermarkets, 5 of which were replaced with newer stores. Reflecting the revised capital expenditure program, the Company expects to open 55 supermarkets, 35 stand-alone drugstores, 90 fuel centers, and complete remodels on 110 supermarkets and 20 drugstores during the 2000 fiscal year.
A conference call to review the preliminary results is scheduled for 3:30 p.m. (MDT) today. A live webcast of the call will be available at www.albertsons.com and a recorded replay will be available on the site for 90 days following the call. In addition, a telephone replay of the conference call will be available through PostView with Global Crossing beginning Tuesday, August 22 at 5:30 p.m. (MDT) and ending Tuesday, August 29 at 5:30 p.m. (MDT). To access PostView, call 1/800/633-8284, enter reservation number 16147608 and follow instructions. For calls placed from outside the United States, dial 858/812-6440.
These preliminary second quarter results are estimates only and actual results may vary. The final results for the second quarter of 2000 will be reported on September 5, 2000.
Albertson’s, Inc. is one of the largest retail food and drug chains in the United States. Based in Boise, Idaho, the Company currently operates over 2,500 retail stores in 37 states across the United States.
This release contains statements that are forward looking. These statements are made based upon current expectations that are subject to risk and uncertainty. The Company does not undertake to update forward-looking statements in this news release to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking information. Assumptions and other information that could cause actual results to differ from those set forth in the forward-looking information can be found in the Company’s filings with the Securities and Exchange Commission, including the Company’s Form 10-Q.