ALBERTSON'S ON TRACK WITH ITS TURNAROUND EFFORTS

ELLIOT ZWIEBACH

RENO, Nev. -- As it completes its year-old restructuring, Albertson's is on target to become an industry powerhouse, Larry Johnston, chairman and chief executive officer, told the company's annual meeting here.

"We've made steady progress toward our goal of transforming Albertson's into the No. 1 food-and-drug retailer," he said, "and the journey to that goal has become our passion.

"Business turnarounds are not easy, but they are achievable. Right now, Albertson's is standing on the threshold of something great, and we intend to exploit our strengths as we move forward."

Addressing the company's first-ever annual meeting outside its home base of Boise, Idaho, Johnston told shareholders, "The new Albertson's is revitalized and operating with a lot of positive energy. We're leveraging our existing strengths as we reposition Albertson's to become the supermarket-and-drug store powerhouse of the 21st century."

Johnston and Peter Lynch, president and chief operating officer, outlined a series of changes and expansions they said will help Albertson's achieve its lofty goals, including the following:

The introduction of dual-branded Albertson's-Sav-on combination stores in Southern California over the next three years. With 268 Albertson's and 364 Sav-on drug stores in the area, "The combination will provide opportunities to increase our market share," Lynch said.

Expansion of Albertson's.com beyond the West Coast. Lynch said the company believes the Internet-based, e-commerce program is "a better mousetrap."

With Albertson's.com established in San Diego, Los Angeles, San Francisco, Seattle and Vancouver, Lynch said the company anticipates expanding to additional markets this year, though he declined to pinpoint where that expansion might occur when questioned after the meeting.

A commitment of capital to the chain's Northern California division. According to Johnston, Albertson's plans to do more remodels on a percentage basis in Northern California than in any other division this year. "And we intend to introduce some new marketing concepts there, though those are still proprietary," he said.

"Northern California has been capital-starved in the past, but we've seen double-digit sales increases there as we've focused on fresh marketing and customer service. And in addition to the remodeling activity, we intend to revitalize our ad campaign there."

Since beginning its restructuring in April 2001, Albertson's has sold or closed 340 underperforming supermarkets, drug stores and fuel centers, and sold or closed an additional 95 stores to facilitate its exit from Houston, San Antonio, Nashville and Memphis.

Questioned after the meeting, Johnston told SN the company's restructuring is virtually complete, "though there is always an infinite capacity to improve anything, so the cost-cutting process will never be over.

"We're constantly looking at every asset and every market in our portfolio, and we're always looking at what builds or destroys shareholder value, and if we find anything that destroys that value, we won't hesitate to take action. But right now, we're happy with what we have," Johnston said.

According to Lynch, "We now have installed a culture of constant improvement, and we're always looking to improve. But our approach is: Don't look back, always look ahead."

During the meeting, shareholders defied management's recommendation and voted in favor of declassifying the board of directors so all directors would have to stand for re-election annually -- a measure approved by shareholders at the company's two previous annual meetings but never adopted by the board.

After announcing that the measure had passed, Johnston said the board "will consider this matter anew."