ALBERTSONS LOSES ARCHITECT OF ITS SUPPLY CHAIN INITIATIVE

Elliot Zwiebach

BOISE, Idaho -- The departure of Albertsons' supply chain guru has left analysts wondering about the company's direction.

Clarence "Gabe" Gabriel is leaving the company, based here, after slightly more than two years as executive vice president, supply chain and asset management, Albertsons said as part of an announcement of a broader restructuring. Gabriel left the company "to pursue other interests," Albertsons said.

"Gabriel was touted as the mastermind of supply chain efforts," Andrew Wolf, an analyst with BB&T Capital Markets, Richmond, Va., told SN. "He was supposed to be the architect of Albertsons' supply chain system, so the question is, was something wrong with the architect or the architecture?

"Maybe Albertsons got all it could out of him, but on the face of it, I see his departure as a negative. And it's unclear how far along Bob Dunst [his successor] is."

John Heinbockel, an analyst with Goldman Sachs, New York, said, "Gabriel's departure is surprising, since he appeared to be one of [Chief Executive Officer] Larry Johnston's key lieutenants."

Heinbockel said the shift of supply chain oversight from Gabriel to Dunst, the chain's chief technology officer, is not a natural fit, "despite the increasing tie-ins between IT and logistics."

Steve Chick, an analyst with JP Morgan Securities, New York, also put a negative spin on Gabriel's departure, calling it "the most significant change" in Albertsons' organizational restructuring. Gabriel had been expected "to be instrumental in the revamping of Albertsons' supply chain," Chick said.

"Given Albertsons' financial performance, management seems a bit stretched as is," he added. "On the surface, the changes per se don't look too significant, [but] they likely point to issues underneath."

Gabriel was the third-highest-paid executive at Albertsons in terms of base salary, receiving $509,616 in 2004, behind only Johnston and Felicia Thornton, chief financial officer, according to company filings with the Securities and Exchange Commission.

The company said the organizational restructuring was designed to improve execution, broaden spans of leadership for key executives, and drive efficiency.

The changes encompassed the following:

- Dunst, 44, formerly executive vice president and chief technology officer, was named executive vice president, technology and supply chain, adding responsibilities for supply chain organization.

- Paul Gannon, 52, formerly executive vice president and chief marketing officer, was named executive vice president, marketing and food operations, adding responsibilities for all of Albertsons' banners. He succeeds Bob Butler, formerly executive vice president, food operations, who retired.

- Felicia Thornton, 41, executive vice president and chief financial officer, added responsibilities for the chain's Six Sigma Quality program and for the Office of Enterprise Program Management. Six Sigma was formerly run by Jim Gentile.

Heinbockel was concerned with "the sheer pace of management change" at Albertsons, noting it has only been 15 months since the last major retooling. "Interestingly, the company's sales momentum has significantly deteriorated since then," he noted.

Analysts were more encouraged by the additional responsibilities given to Gannon.

"Having Paul Gannon assume a larger role overseeing food operations is a positive," Wolf said. "Here in the Southeast, we've seen how much Food Lion has improved since Hannaford assigned Rick Anicetti, an executive with good operational knowledge, to run those stores."

Heinbockel said Gannon's promotion "is the most promising of [the organizational] moves," given his operations background.