BOISE, Idaho -- Albertson's recent failure to meet its historic earnings-growth levels was the price necessary to gear the company for new forms of competition, Gary Michael, chief executive officer, said at the annual meeting here.
Noting that earnings growth for 1996 -- while good -- was below the company's traditional standards, Michael said that the performance falloff was necessary to prepare the company for long-term success in a world where "grocery stores are not just grocery stores anymore.
"We're not just competing for dollars, we're competing for shopping time," Michael said. He said Albertson's considers its competition to include restaurants, supermarkets and other retailers.
Michael outlined the company's $3.8 billion capital expenditure program, which includes 350 new stores and 250 remodels by 2001. The chain, which has been putting emphasis on home-meal replacement strategies, will also continue to invest in its distribution system and new information systems and technology.
Albertson's president, Dick King, said stores will get slightly bigger, from the present average of 48,000 square feet to a projected 55,000 square feet after the capital program has been completed. King said the company is also experimenting with the 65,000-square-foot Village Market format, which features a streetscape design, postal and banking facilities and destination departments including candy and baby care.
Last year net earnings increased 6.2%, from $465 million to $494 million. That compares with increases of 16.2%, 17.6% and 26.4% in the prior three years.
Sales last year increased 9.5% from $12.6 billion to $13.8 billion. The company also added 70 stores, for a total of 833.
Operating profit last year was 6.17% of sales, compared with 6.41% in 1995. Net earnings as a percentage of sales were 3.58%, compared with 3.69% in 1995. "They were solid results," Michael said, "but not where we wanted them to be or where people expected them to be."
The company also reported that first-quarter 1997 profits would be down 3% compared with 1996 -- the first earnings decrease in 27 years. Michael said financial results have had an adverse effect on the company's share price. The high for the third quarter of 1996 was 43 3/4. Last Thursday, Albertson's closed at ....
"Earnings are flat and stock prices followed," Michael said. "We have not provided good return for our shareholders over the last year."
Michael compared Albertson's situation to basketball superstar Michael Jordan, who averages 30 points a game but sometimes reaches 50 points.
"When Jordan 'only' gets 22 or 23 points, people ask 'What happened to Jordan?' " Michael said. "[Albertson's performance] has not been up to our usual standards, and we're making a few changes in our style of play. But the company is still rock solid."