ALBERTSONS EXITS NEW ORLEANS MARKET 2004-04-26 (2)

MARK HAMSTRA

BOISE, Idaho -- Albertsons here said it would sell four stores in the New Orleans area to A&P, Montvale, N.J., for an undisclosed sum and that it was in talks to sell its remaining three stores in the market.

A&P, which operates 20 Sav-A-Center Food Markets in Louisiana and four in Mississippi, said it expected to complete the acquisition within 60 days and to reopen the stores as Sav-A-Centers in July. The four stores are located in the towns of Gretna, Slidell, Covington and Mandeville.

"Our investment in these stores underscores Sav-A-Center's commitment to the New Orleans area," said Glenn Dickson, president, Sav-A-Center, in a prepared statement.

Albertsons said its policy is to exit those markets where it does not have a No. 1 or No. 2 share "and cannot see a path to get there." Albertsons' stores in other Louisiana markets, where it operates about 25 other locations, are not affected, the company said.

J.H. "Jay" Campbell, president and chief executive officer, Associated Grocers of Louisiana, Baton Rouge, said the New Orleans market has a diverse group of competitors and is a very expensive one in which to operate stores.

"There are a lot of independents in the marketplace," he told SN. "Plus, you've got Wal-Mart, you've got A&P, Winn-Dixie and of course Albertsons. It's tough to grow without trying to acquire someone. The geographic space in New Orleans is at a premium -- it's very expensive because there's no land."

Andrew Wolf, analyst, BB&T Capital Markets, Richmond, Va., said the decision to exit New Orleans fits with Albertsons' previously disclosed strategy to focus on markets where it has a strong share.

"In a market like New Orleans, I think they had to either get out or buy the A&P stores or the Winn-Dixie stores," he said. "But this doesn't mean they're going to immediately get out of all the markets where they are No. 3. In each market they are going to get to No. 1 or No. 2 within some period of time. This doesn't tell you anything about Florida or Denver. There are different reasons to want to be there and not want to be there."

In the greater New Orleans area, Wal-Mart Stores, Bentonville, Ark., is the market share leader with about a third of the market, followed by Winn-Dixie Stores, Jacksonville, Fla., analysts said.