Signaling a continued acceleration of its business turnaround, Albertson’s, Inc. (NYSE:ABS) one of the world’s largest food and drug retailers, today reported second quarter earnings that exceeded both company guidance and First Call consensus estimates. Sales in the quarter totaled almost $9.6 billion. Before restructuring and other charges diluted EPS were $0.45 and net earnings for the period totaled $184 million. Company guidance for EPS was at least $0.43 and First Call consensus was $0.44.
Larry Johnston, Chairman and CEO said, “We are very encouraged by these results and remain committed to taking the steps necessary to unleash the full shareholder value that is inherent in this great company. The results we are reporting today prove that the plans we have implemented are beginning to give us traction to continue moving the company in the right direction. We will continue taking the steps necessary to sustain our positive momentum, remaining sharply focused on our five strategic imperatives.”
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For the 13 week period ended August 2, 2001, total sales increased 3.9% when compared to the year earlier period. Comparable store sales, including replacements increased 1.9% and identical store sales increased 1.5%.
As previously announced, the company recorded a charge in the second quarter to cover a major portion of its recently announced restructuring program. The second quarter charge totaled $558 million pretax, $0.82 per share, covering severance benefits, asset impairments and lease terminations including $450 million in noncash charges. Mr. Johnston said, “This restructuring plan is a major step in returning Albertson’s to peak competitive condition. The associated charges will be justified in a relatively short period of time by the company’s improved performance.” Including restructuring and other charges, the company reported a net loss for the quarter of $151 million or $0.37 per share.
Commenting on the company’s positive sales momentum, Peter Lynch, President and COO said, “Throughout this quarter, the company’s increased investment in our strategic sales initiatives resulted in same-store sales growth above the velocity of the industry. This investment also drove a slight gross margin decrease during the quarter. However, in future quarters we will have a whole new source of funds to invest in the marketplace as we begin to realize the benefits of our restructuring activities. Our plan is to continue to drive positive sales momentum by investing a significant portion of these dollars in selected strategic markets. We fully expect that these actions, coupled with our continued thrust into corporate brands and value-added products, will result in both strong sales and improved gross margins.”
Discussing the progress on expense ratios, Mr. Lynch said, “During the quarter, the company also saw a continued narrowing of the gap in our Selling, General and Administrative (SG&A) expenses versus the prior year. Costs such as labor, maintenance, supplies, and other retail expenses continued to decline. Going forward, our recently announced restructuring plan and the many new cost containment programs being implemented in every corner of this company will positively impact our SG&A expense ratios. As the savings from these aggressive programs begin to accelerate over the next several quarters, we expect to see a continued narrowing of the SG&A expense gap versus the previous year. Eventually these costs should begin consistently tracking below prior year actuals as we move toward our goal of reaching industry leading levels of efficiency. It is this combination of cost discipline and robust sales momentum that will yield the operational excellence we are striving for at Albertson’s.”
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By GlobalDataJohnston concluded saying, “While we are extremely encouraged by this progress, it is still too early in our game plan to provide long term guidance on the company’s earnings per share. We are however, looking for earnings per share of $0.44 for the third quarter. This will be accomplished by realizing the benefits from our restructuring actions while simultaneously achieving our comparable store sales growth targets. It is also important to note that while we anticipate completing roughly one half of our 165 announced store closures this fiscal year, we still expect fiscal year 2001 sales to reach at least $38 billion, which will represent an increase of $1.2 billion over the prior year.”
Albertson’s is one of the world’s largest food and drug retailing companies, with annual revenues of approximately $37 billion. Based in Boise, Idaho, the company currently employs more than 235,000 associates and operates more than 2,500 retail stores in 36 states across the U.S. Its banners include Albertson’s, Jewel-Osco, Acme, Osco Drug, Sav-on Drugs, Max Foods, Super Saver, and Seessel’s by Albertson’s.
The company does not undertake to update forward-looking statements in this news release to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking information. Assumptions and other information that could cause actual results to differ from those set forth in the forward-looking information can be found in the company’s filings with the Securities and Exchange Commission, including the company’s Form 10-Q.
ALBERTSON’S, INC.
(Unaudited – In millions except per share data)
Consolidated Earnings
13 Weeks Ended 13 Weeks Ended
August 2, 2001 August 3, 2000
———————————————————————-
Sales $ 9,577 100.00% $ 9,214 100.00%
Cost of sales 6,862 71.64 6,572 71.33
———————————————————————-
Gross profit 2,715 28.36 2,642 28.67
Selling, general and
administrative expenses 2,341 24.45 2,222 24.11
Restructuring charges and other 510 5.33
Merger-related (income) expense (1) (0.01) (1) (0.01)
———————————————————————-
Operating (loss) profit (135) (1.41) 421 4.57
Other (expenses) income:
Interest, net (111) (1.16) (99) (1.07)
Other, net (1) (0.01) 3 0.03
———————————————————————-
(Loss) earnings before
income taxes (247) (2.58) 325 3.53
Income tax (benefit) expense (96) (1.00) 131 1.42
———————————————————————-
Net (Loss) Earnings $ (151) (1.58)% $ 194 2.11%
—————— ——————-
(Loss) Earnings Per Share:
Basic ($0.37) $0.46
Diluted ($0.37) $0.46
Weighted Average
Common Shares Outstanding:
Basic 406 423
Diluted 408 423
LIFO charge before income taxes $7 $6
———————————————————————-
26 Weeks Ended 26 Weeks Ended
August 2, 2001 August 3, 2000
———————————————————————-
Sales $ 18,908 100.00% $18,227 100.00%
Cost of sales 13,535 71.58 13,069 71.70
———————————————————————-
Gross profit 5,373 28.42 5,158 28.30
Selling, general and
administrative expenses 4,578 24.21 4,360 23.92
Restructuring charges and other 510 2.70
Merger-related (income) expense (15) (0.08) 1 0.01
———————————————————————-
Operating (loss) profit 300 1.59 797 4.37
Other (expenses) income:
Interest, net (219) (1.16) (182) (1.00)
Other, net (12) (0.06) 4 0.02
———————————————————————-
(Loss) earnings before
income taxes 69 0.36 619 3.40
Income tax (benefit) expense 34 0.18 246 1.35
———————————————————————-
Net (Loss) Earnings $ 35 0.18% $ 373 2.05%
————————————-
(Loss) Earnings Per Share:
Basic $0.09 $0.88
Diluted $0.09 $0.88
Weighted Average
Common Shares Outstanding:
Basic 406 423
Diluted 408 423
LIFO charge before income taxes $15 $12
———————————————————————-
Consolidated Earnings – Before Restructuring and Other Charges
13 Weeks Ended 13 Weeks Ended
August 2, 2001 August 3, 2000
———————————————————————-
Sales $ 9,577 100.00% $ 9,214 100.00%
Cost of sales 6,862 71.64 6,571 71.32
———————————————————————-
Gross profit 2,715 28.36 2,643 28.68
Selling, general and
administrative expenses 2,291 23.93 2,196 23.84
———————————————————————-
Operating profit 424 4.43 447 4.84
Other (expenses) income:
Interest, net (111) (1.16) (99) (1.07)
Other, net (1) (0.01) 3 0.03
———————————————————————-
Earnings before
income taxes 312 3.26 351 3.81
Income taxes 128 1.34 140 1.52
———————————————————————-
Net Earnings $ 184 1.92% $ 211 2.29%
——————————————–
Earnings Per Share:
Basic $0.45 $0.50
Diluted $0.45 $0.50
Return on average
stockholders’
equity (1) 12.9% 14.6%
Return on average
assets (1) 4.5% 5.5%
Effective tax rate 41.0% 39.8%
26 Weeks Ended 26 Weeks Ended
August 2, 2001 August 3, 2000
———————————————————————-
Sales $ 18,908 100.00% $ 18,227 100.00%
Cost of sales 13,535 71.58 13,046 71.57
———————————————————————-
Gross profit 5,373 28.42 5,181 28.43
Selling, general and
administrative expenses 4,515 23.88 4,281 23.49
———————————————————————-
Operating profit 858 4.54 900 4.94
Other (expenses) income:
Interest, net (219) (1.16) (182) (1.00)
Other, net (12) (0.06) 4 0.02
———————————————————————-
Earnings before
income taxes 627 3.31 722 3.96
Income taxes 257 1.36 285 1.56
———————————————————————-
Net Earnings $ 370 1.96% $ 437 2.40%
——————————————–
Earnings Per Share:
Basic $0.91 $1.03
Diluted $0.91 $1.03
Return on average
stockholders’
equity (1) 13.1% 15.1%
Return on average
assets (1) 4.6% 5.6%
Effective tax rate 41.0% 39.5%
———————————————————————-
(1) Annualized
— Certain reclassifications have been made in the prior year to
conform to classifications used in the current year.
ALBERTSON’S, INC.
(Unaudited – In millions)
Consolidated Balance Sheets
August 2, 2001 August 3, 2000
———————————————— ————-
Assets
Current Assets:
Cash and cash equivalents $ 140 $ 120
Inventories 3,236 3,123
Property held for sale 257 82
Other current assets 960 646
———————————————— ———-
Total Current Assets 4,593 3,971
Other Assets 444 428
Goodwill and
Other Intangibles, net 1,628 1,741
Land, Buildings and
Equipment, net 9,212 9,195
———————————————— ———-
Total Assets $ 15,877 $ 15,335
———— ———-
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable $ 2,132 $ 2,234
Current portions of long-term
debt and capitalized lease
obligations 139 112
Other current liabilities 1,282 1,111
———————————————— ———–
Total Current Liabilities 3,553 3,457
Long-Term Debt 5,492 4,894
Capitalized Lease Obligations 244 207
Other Long-Term Liabilities
and Deferred Credits 985 953
Stockholders’ Equity 5,603 5,824
———————————————— ———–
Total Liabilities and
Stockholders’ Equity $ 15,877 $ 15,335
———— ———–
Total Common Shares
Outstanding at End of Period 406 421
Consolidated Cash Flows
26 Weeks Ended 26 Weeks Ended
August 2, 2001 August 3, 2000
—————————————————- ————-
Cash Flows From
Operating Activities:
Net earnings $ 35 $ 373
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depreciation and amortization 495 458
Goodwill amortization 28 28
Merger-related noncash (income) expense (13) 3
Restructuring and other noncash charges 454
Net loss on asset sales 12 8
Net deferred income taxes and other (199) 37
Decrease (Increase) in cash surrender
value of Company-owned
life insurance 13 (4)
Changes in operating
assets and liabilities 182 340
—————————————————- ————-
Net cash provided by
operating activities 1,007 1,243
—————————————————- ————-
Cash Flows From
Investing Activities:
Net capital expenditures (708) (708)
Decrease in other assets 80 17
—————————————————- ————-
Net cash used in
investing activities (628) (691)
—————————————————- ————-
Cash Flows From
Financing Activities:
Payments on long-term borrowings (27) (345)
Proceeds from long-term borrowings 613 515
Net commercial paper and
bank line activity (743) (601)
Proceeds from stock options
exercised 15 5
Cash dividends paid (154) (156)
Stock purchased and retired (95)
—————————————————- ————-
Net cash used in
financing activities (296) (677)
—————————————————- ————-
Net Increase (Decrease) in Cash
and Cash Equivalents 83 (125)
Cash and Cash Equivalents
at Beginning of Period 57 245
—————————————————- ————-
Cash and Cash Equivalents
at End of Period $140 $ 120
——— ————-
— Certain reclassifications have been made in the prior year to
conform to classifications used in the current year.
