THE ALBERTSON'S STORY: SO FAR A WINNING SCREENPLAY

David Orgel

With the Academy Awards still a recent memory I was thinking about Albertson's Oscar-caliber performance the other week at its analyst and investor conference in New York.

The presentation by management hit all the bases. It was part-informational, part-cheerleading session. It benefited from fancy visuals and catchy music. The elegant room at the Pierre Hotel was filled with banners heralding the Boise, Idaho-based retailer's brands. And the storyline was first-rate: the still-new chairman and chief executive, Larry Johnston, moving forward with a corporate recovery and reintroducing the old company -- now dubbed "The New Albertson's."

Cementing the total effect was the dialogue, which was full of sports imagery and earnestness. "If I'm the coach of this team, then Peter is the quarterback," said Johnston, referring to Peter Lynch, president and chief operating officer.

At another moment, Johnston, who came over a year ago from Jack Welch's General Electric, assured, "I promise you Albertson's is a company that's well on its way to becoming a premier food and drug retailer."

With rousing talk and lots of flourishes, Albertson's clearly brings a lot of style to its message. But what about the substance? As it turns out, management has a lot to be proud of. The company has made significant inroads since last April when Johnston came on board with the goal of energizing a weakened giant. Since that time, Albertson's has announced departures from underperforming markets, including Houston, Memphis, Nashville and San Antonio. The company reduced corporate and administrative staffs by 20%. The retailer has shown it can play the outsourcing card with the sale of its Tulsa, Okla., distribution center to Fleming, Dallas, which will service Albertson's stores in Oklahoma and Nebraska.

These are no small feats. As Johnston pointed out, "These are tough steps that were necessary to lower operating costs and increase our competitive position."

Management is now saying the asset phase of its restructuring is over and the next phase is about to begin. Said Lynch: "We have stabilized the ship and can focus on growing the top line."

There are real opportunities for the company. It has growth potential on a large range of fronts, including Internet shopping, fuel service, private label, fresh foods, neighborhood marketing and ethnic merchandising. Albertson's dual-branded combo stores (branded supermarket with branded drug store) are highly competitive vehicles.

Now the challenge will be to execute all of this well. Mark Husson, an analyst with Merrill Lynch, New York, told me the retailer's asset disposals and future cost-saving measures will be beneficial. But how Albertson's invests savings will be crucial. "Profitable growth is the key, not just growth," Husson said. "And return on invested capital."

Husson is betting the retailer is on a good track. "We think the future ... is starting to look much better," he wrote in a report that described Merrill Lynch's upgrade of its intermediate recommendation to "buy" from "neutral."

Albertson's has a long road ahead before it takes the honors for "Best Performance by Management in a Corporate Recovery." But it's now possible to visualize such a scenario, and I'll bet it would be one grand acceptance speech.