American Stores Co. did not come through for its shareholders in the last half of 1997, company chairman and chief executive Victor L. Lund said Wednesday.
Lund told hundreds of shareholders at the company's annual meeting in Salt Lake City that he felt personally responsible for a decline in earnings during the third and fourth fiscal quarters, which also saw a drop in the company's stock price from $28 to $19 per share.But he said the company's management team is working to make sure the problems are solved and performance will improve.
"I know that we had a number of struggles in 1997," Lund said. "We let you down, and I don't like it. . . . We will not accept failure."
He said much of the difficulty arose as American Stores consolidated its procurement and marketing operations by moving them from Chicago to a new 25-story Salt Lake building, which was dedicated Tuesday.
The company should have known problems would result from the move, Lund said, but the systems it had in place for the previous 20 years had never let it down before.
"It was a surprise to us," he said. "I hate to lose, and I hate to have downsides. It was very, very hard for us. . . . But without what we have done, the second half of last year would have been worse."
Lund said the plan that will increase the number of American Stores employees in Salt Lake from 200 in 1993 to almost 2,000 later this year is part of the reason the company is poised for future success.
"We are confident that our plan for growth is working and is squarely on track," he said during the meeting, which started with a modern dance interpretation of the food and drug retailer's recent history. "We've set our sights very high because we know our visions of tomorrow will be achieved. . . . It was never without cost, frustration or even mistakes, but we kept moving forward."
Lund said American Stores was able to defend its market share in the face of mounting competition in 1997, and its technology group made great progress in upgrading the company's pharmacy inventory management systems.
"We progressed at a torrid pace in all areas," he said.
None of the shareholders present asked any questions of Lund during the meeting, and he later refused to comment on rumors that American Stores could be a takeover target.
Lund said American Stores opened 96 new or replacement stores during 1997 and finished remodeling 65 others. And even with the problems late in the year, the company had 1997 sales of $19.1 billion and diluted earnings per share of $1.01, compared to 98 cents in 1996.
"The results of our many investments in our business should become visible and obvious over the next 12 months," Lund said. "Few companies in the food and drug sector have made the tremendous investment that American Stores has made over the last four years. We believe the foundation for consistent, sustainable growth has been laid."
American Stores will continue to open new locations in the coming year, he said. And he hopes that, by the end of 1998, the company's stock will have returned to higher levels so it can consider larger acquisitions.
He said the company does not have plans to open any additional stores in Utah, leaving it with just one food and drug theme store in its new building at 299 S. Main.
American Stores operates 1,558 stores in 25 states under the names Acme Markets, Jewel Food Stores, Lucky Stores, Osco Drug and Sav-on Drug.