ALBERTSONS EXECUTES NATIONAL PROMOTIONS TO IMPROVE COMPS 2004-06-07 (2)

ELLIOT ZWIEBACH

BOISE, Idaho -- Albertsons here said last week it expects 30 national promotions this year will give it "an increased level of firepower in the marketplace" to boost center store sales.

Larry Johnston, chairman and chief executive officer, said the company has already completed three national promotions over the last few weeks, "and we're very, very encouraged by the center store lift we are getting, and I would say we are finally beginning to turn this company into an execution machine on a national basis [as we] learn how to execute these promotions consistently across the board rather than at seven or eight different divisions."

The promotions involve pre-set programs with some of the chain's largest consumer packaged goods vendors for placement at its nearly 2,500 supermarkets and drug stores, Johnston explained.

Initially, Albertsons has worked with 10 CPG "design partners," he said, "but with 50,000 stockkeeping units in the store, there are still a lot of partners out there that would want to jump on this bandwagon."

Consequently, Albertsons believes it has barely scratched the surface, he pointed out. "We're working with some of the larger CPG players to test the concept and make sure we can execute, and while we've been very encouraged after the first three promotions, this is just the tip of the iceberg. This is like the second batter up in the first inning, so we have a long way to go, and there's a lot of runway left.

"But I believe we are going to have more fuel to do whatever it takes in the marketplace to fight the battle and begin driving more positive comparable-store sales increases," Johnston said.

He said the national promotions "give us something we've never had before, which is consistent execution across all stores, and we believe it's going to have a major impact on identical-store sales in a very tough part of the store.

"It's also a partnership with our CPG vendors, and we're working back through the supply chain, all the way from packing and shipping to merchandising, to make sure we see an overall positive margin for both the vendor and ourselves. In those first three promotions, we've seen an increase in compliance, and we've been watching display execution very closely, and we're pretty pumped that, as the other 30 promotions roll out, we are going to be more and more successful."

Johnston said the collaboration with CPG vendors "is huge, and as we execute these national promotions and drive more sales and margin, and help them improve their costs through the supply chain, we're also going to generate more and more fuel for price investment in the marketplace, and we're pretty excited about that."

Johnston said Albertsons also hopes to boost center store sales with its 10-for-$10 Mix & Match program -- the chain's response to the dollar store phenomenon, "which is a consumer trend we could not ignore," he explained.

After testing different options over the past year, Johnston said Albertsons has installed Mix & Match sections in nearly 80% of its stores, with the national rollout scheduled to be completed by the end of summer.

Johnston made his remarks during a conference call with industry analysts to discuss financial results for the first quarter ended April 29, which included the last few days of the 20-week strike-lockout in Southern California. Sales for the 13-week quarter fell 2.5% to $8.7 billion, comparable-store sales dropped 3.7% and net income fell 79.1% to $36 million, or 10 cents per share.

Johnston said the labor dispute cost the company approximately $386 million in total sales during the quarter. Excluding Southern California, comparable-store sales were up 0.3%, he pointed out.

The company said net income from continuing operations declined 67.3% to $56 million, or 15 cents per share, and excluded several onetime costs that totaled 31 cents: 27 cents per share in Southern California reflecting the impact of the labor dispute on operations, a contribution to the health and welfare trust, and a contract ratification bonus; 2 cents in legal costs and a 1-cent workers' compensation adjustment in Southern California, unrelated to the dispute; and 1 cent related to the reorganization of Albertsons' Dallas-Fort Worth division.

Johnston said the company is ahead of its internal plans for rebuilding sales in Southern California, which he said he attributed to the launch of a dual-branding program between Albertsons and Sav-on Drugs, the launch of a preferred shopper card, an aggressive investment in price, "and the fact we were the first of the three grocery chains to get associates back to work."

1ST-QUARTER RESULTS

Qtr Ended: 4/29/04; 5/1/03

Sales: $8.7 billion; $8.9 billion

Change: -2.5%

Comp-store: -3.7%

Net Income: $36 million; $172 million

Change: -79.1%

Inc/Share: 10 cents; 47 cents