Albertsons Inc. shareholders began watching their stock portfolios nervously last October when the company announced its third- and fourth-quarter earnings would be below analysts' estimates.
Stock in the Boise-based supermarket chain had started dropping a few days before from a high of $43 per share. By April 11, Albertsons stock had lost 30 percent of its value, tumbling to a 52-week low of $30.50 before rebounding slightly to $32.37 1/2 on Friday.
Experts say the decline is due primarily to Albertsons' flat earnings. Although the company's totalstore sales were higher than most of the industry's, Albertsons said its costs were higher than projected because of hefty spending on the future.
Over the next five years, the chain plans to spend $3.8 billion opening new stores, remodeling old ones and implementing a host of program sto increase sales. But A. Craig Olson, Albertson's chief financial officer, said 90 percent of the funds would come from the company's own money.
George Thompson, a Prudential Securities analyst in New York, said the company's earnings have declined because Albertsons made an uncharacteristic mistake. But he said it is not the only grocery chain guilty of the error.
The oversight was failing to respond quickly when Safeway, a national chain based in Oakland, Calif., began slashing its prices. Safeway is the nation's third-largest supermarket chain, and Albertsons is fourth.
"Albertsons and a lot of the major retailers didn't immediately recognize what was happening," Thompson said.
The mistake was compounded by Albertsons' rapid expansion, he said.
The company operates 829 stores in 20 state. It opened 70 new stores last year and expects to open 65 this year. By 2001, Albertsons plans to open 350 new stores.
And even though it has stumbled in the past year, Thompson said the company has moved swiftly to fix the problems and remains the most profitable chain in the country.
"They're further ahead than anybody just because they're Albertsons," he said.
The company has fought the competition by cutting prices and instituting programs that consumers love, such as home meal replacements that are a growing part of all supermarket's business.
Renee Bergquist, Albertsons direcgtor of investor relations, said another way Albertsons stays competitive is by aggressively closing stores that are not productive.
"In the last year, we've closed eight stores," she said. "In the long run, we've closed over 400. That keeps the store base up to date and productive."
Albertsons spokesman Michael Read said the company's strategy of owning rather than leasing stores also has contributed to its success.