BOISE, Idaho -- Albertson's here plans to embark on an ambitious store opening and remodeling campaign during the next five years at a cost of some $11 billion, Gary Michael, chairman and chief executive officer, said during last week's annual shareholders meeting.
The chain -- following its pending merger with American Stores Co., Salt Lake City -- intends to open 750 new food-and-drug combination stores, 500 stand-alone drug stores and 600 fuel centers during the period, he said. Albertson's also will remodel 730 existing stores and will continue to invest in store-level technology and its distribution system.
Albertson's is now closing in on its merger with American Stores, a combination that would give Albertson's 2,400 stores in 38 states and make it the second-largest grocery chain in the nation. The deal is worth about $11.8 billion in stock and debt assumption. The merger, announced last August, has been delayed pending final approval from the Federal Trade Commission. It's expected that the company may have to divest some of its stores and some of American's in southern California, Nevada and New Mexico to obviate antitrust concerns.
Company officials said they didn't know how many stores would be sold, but securities analysts have estimated the number at 120, or more.
Michael acknowledged that the merger process has gone more slowly than had been planned, depressing the company's stock price.
Michael told the approximately 2,500 gathered here for the annual meeting late last month that "I can't talk about Albertson's -- past, present or future -- without talking about growth."
Indeed, Albertson's will mark its 60th anniversary next month by opening its 1,000th store here, although that information seemed to pale against the upcoming merger, which held center stage: "Stock analysts are optimistic [about the merger]. The merger is great for Albertson's because it will make it a truly national company." Moreover, the company has posted 29 consecutive years of increased sales and earnings.
Shareholders, too, seemed optimistic and were in the mood for good news at the meeting.
"I'm just waiting to see what the merger does for the price of the stock, and I'm hoping it splits," gushed one.
Albertson's is positioned to integrate American Stores, said Dick King, Albertson's president and chief operating officer.
The company intends to keep American Stores' Salt Lake City headquarters building, perhaps leasing out a portion. About 700 of American Stores' 1,900 employees there would remain, working mostly in information technology.
Albertson's probably would cut some of American's administrative employees, but isn't projecting any big layoffs.
Already, about 150 American Stores employees have agreed to move to Albertson's headquarters here. That's the bulk of the new jobs Albertson's would bring to this city immediately after the merger, although the company will continue to expand its corporate work force over the next few years.
Albertson's already has purchased the former Ore-Ida Foods headquarters building next door and plans to begin moving in next month.
Because the combined company would be more efficient and would wield more power with suppliers, Albertson's expects the merger to produce $100 million in savings in the first year and $300 million a year by the third year.
Most of the cost savings would go back into the business but some would be passed on to consumers, Albertson's spokeswoman Jenny Enochson said.
It's hoped the combined company would be able to keep best practices from each chain, improving services throughout, Enochson said. And it probably would put more emphasis on private-label brands, which have higher margins than branded goods.
Albertson's already has changed the way it would manage its new nearly national empire. It has set up eight regions, each headed by a regional president.
"We'll manage each region as if it were our only region," King said.
The company has doubled the number of executives on its management team and created a four-person office of the chairman to run the company.
"The company is too big for any one or two people to keep on top of things," Albertson's spokesman Mike Read said.
The office, in addition to Michael and King, includes Teresa Beck, president of American Stores, and Carl Pennington, Albertson's executive vice president of marketing.
Several American board members also would join Albertson's board, which is to be expanded from 15 to 20 members.
Shareholders also learned how Albertson's is moving more aggressively to take the lead in introducing innovative ideas. Among those new features:
A new focus on neighborhood marketing has been undertaken.
Internet sales: Albertson's opened its first virtual store last year in the Dallas area.
Fuel centers: Albertson's first gas pumps were installed at its Eagle, Idaho, store in November 1997. The company has since expanded the concept to 25 more stores and plans to open 600 new fuel centers over the next five years.
In-store full-service banks, dry cleaning, photo finishing, video rentals and other conveniences for customers are being augmented. Albertson's also is introducing upscale prepared-food departments, called J.A.'s Kitchen.
Self-scanners that allow shoppers to ring up their own groceries are being used. Since installing the first one here last summer, Albertson's has installed upgraded versions in Portland and Seattle and plans to keep refining the concept.
Coffee bars and seating areas, which reinforce the idea of the supermarket as a social center for the community, will be featured.
