Key developments: Conversion of 17 Albertsons stores to the discount Super Saver banner and buying small, high-end Bristol Farms; investing in technology and management to spur growth.
What's next: Keeping costs low while waiting for the economic climate to get sunnier; a growing presence in Southern California.
Larry Johnston has big plans for Albertsons, and he hasn't let limited short-term sales gains in the past year affect his long-term goals for the company.
While cutting costs, broadening a smaller management team's scope, increasing investments in technology, entering new markets and exiting unproductive ones, Johnston's eye has been fixed on the future.
"We remain disciplined in our approach to investing for sustained top-line growth vs. renting short-term sales gains that are not sustained," Johnston said in June. "That's what you do in a tough period of time, and we think when the economy gets stronger, you're going to see a much stronger company."
Now in his fifth year at Albertsons' helm, Johnston has put in motion an operating strategy that looks quite unlike the Albertsons he joined in 2001, said Andrew Wolf, an analyst with BB&T Capital Markets, Richmond, Va.
"Albertsons needed somebody who would make tough decisions, strategic decisions," Wolf said. "His biggest decision so far, I believe, has been to buy Shaw's [Supermarkets]."
Wolf called Johnston's 2004 acquisitions of Shaw's in New England and Bristol Farms in Southern California "positive" measures to go along with "negative" measures like cutting costs and exiting markets in Nebraska and Louisiana. The acquisitions also move the company closer to becoming the top multimarket player that it strives to be, Wolf added.
"They've taken a barbell approach," Wolf said. "They're using long-term strategies and multi-formats to reach their goals -- which we might not see the results of for at least a couple years -- while trying to get by and make their earnings in the meantime."
Among Albertsons' most significant initiatives in pricing this year was "Check the Price," a new technology-based program introduced in late 2004 that aims to lower and establish everyday-pricing on products customers buy most frequently. Wolf called the technology another long-term investment that won't be gradable anytime soon, but it's consistent with Johnston's desire to eventually be at the top of all Albertsons' markets, "next to Wal-Mart," he said.
The ongoing recovery from last year's strike in Southern California contributed, along with the acquisition of Shaw's, to a boost in sales during the first quarter. With the acquisition later of Bristol Farms, Johnston appears to be looking closely at the Southern California division.
"We believe that, over the next couple of years, that division is not only going to be the largest in our company, but it's also going to be contributing a tremendous amount of profit to the enterprise," Johnston said.
