ALBERTSON'S: MOMENTUM UP, PLANS TO 'PLAY OFFENSE'

NEW YORK -- Albertson's, Boise, Idaho, last week outlined its plan to "unleash its full potential."Larry Johnston, chairman and chief executive officer, said the company is focusing on five key strategic imperatives: cutting costs, maximizing return on investments, stepping up the use of technology, increasing attention to customer needs and building employee morale."We plan to play offense," Johnston

NEW YORK -- Albertson's, Boise, Idaho, last week outlined its plan to "unleash its full potential."

Larry Johnston, chairman and chief executive officer, said the company is focusing on five key strategic imperatives: cutting costs, maximizing return on investments, stepping up the use of technology, increasing attention to customer needs and building employee morale.

"We plan to play offense," Johnston said at an analysts meeting here last week. "We saw that Albertson's was a company losing momentum, and we understand our mission."

The company also last week released its results for the second quarter and first half ending Aug. 2.

Citing strong sales, Albertson's said it beat per share earnings estimates by 1 cent for the quarter.

Johnston added that the company is also open to any "bolt-on acquisitions" that would create sales growth. "Scale is everything," he declared.

Johnston also said the company will focus on remodeling stores quickly and more efficiently, adding that Albertson's expects to complete 155 remodels within fiscal 2001.

Peter Lynch, president and chief operating officer, noted that the company could close even more than the approximately 165 stores Albertson's announced it would close in July.

"Some of these stores were poor real estate decisions, or the format was not right," he said. "It is a learning process but we will close stores as we focus on matching the right format to each location."

Lynch also noted that the company has invested in programs to make distribution more efficient and so reduce labor time and costs. "We have created a more aisle-friendly pick process, where all products on a pallet go to the same aisle to cut time and costs," he said.

In addition, the company has instituted a companywide technology system that the company hopes will help identify areas where costs can be reduced, according to Lynch.

"Customer-focused" growth initiatives include the rollout of a new loyalty card program, he added. The program will be introduced in one test market this year, with more markets to follow in 2002.

Albertson's will also be offering an "Associate Advantage" loyalty card to employees in efforts to increase sales, he noted. "At American Stores [the Salt Lake City-based retailer Albertson's acquired in 1999], there was no attention paid to loyalty cards," Lynch said. "Now that the two companies are together, we can roll this out on a national level."

The company also plans to extend its food-and-drug-combination format outside of the Chicago market, with two market launches of the combo format in November and more to follow next year, according to Lynch. "We will probably add some stand-alone drug stores in these markets, as the cobranding can be a huge asset," he said.

Albertson's has been aggressively competing on price, and the company is at or below price parity in 15 of its Top 20 operating markets, he pointed out.

Other merchandising and marketing initiatives that Albertson's will be continuing are fuel centers and its "focus on fresh," Lynch said.

Johnston observed, "The new Albertson's will focus on what's new, what's next and how to get on board." He also said that Albertson's will continue to expand its ethnic offerings in all divisions and will expand on private label, including extending the Lucky brand outside of California.

Jack Murphy, vice president, Credit Suisse First Boston, New York, told SN Albertson's efforts are encouraging. "They are looking at every process and expense to cut costs and to drive sales," he said. "It seems like the true early stages of a turnaround."

Deborah Weinswig, associate director, Bear Stearns New York, observed that the meeting was as positive as it could be without any major announcements.

"The most exciting things Albertson's said they are doing is extending the Lucky brand, noting they are not opposed to exiting poorly performing markets and also stating their commitment to being aggressive on price," Weinswig said. "Also, the fact that they are expanding ethnic and general merchandise offerings by focusing on the food-and-drug combination will help them to nail the one-stop-shopping angle."

As for the financial results released last week, Albertson's said it beat per share earnings estimates by 1 cent for the quarter, before $559 million in one-time restructuring charges.

Estimated earnings per share for the quarter were 44 cents, and the company posted a diluted EPS, before restructuring charges, of 45 cents, down from 50 cents for the comparable quarter in the previous year.

Sales for the 13-week quarter increased 3.9% to $9.6 billion, comparable-store sales rose 1.9%, and identical-store sales increased 1.5%.

For the quarter, the company had a net loss of $151 million and a loss of 37 cents per share after restructuring and other charges.

For the 26-week first half, sales rose 3.8% to $18.9 billion while income declined 90.6% to $35 million, with earnings per share of 9 cents, compared with the previous year's first half earnings per share figure of 88 cents.