Industry experts say that a 78-basis improvement in operating margin is significant given the thin margins in the grocery business. Most of the savings is attributable to reductions in wages and benefits and lower legal expenses and workers' compensation costs.
Since it implemented its cost savings program in mid-2001, Albertson's has saved $1.054 billion. The goal is to save $1.25 billion by the end of fiscal 2006. Total gross profit for the quarter increased 16% to $2.81 billion from $2.43 billion for the sameperiod last year.
"We're very pleased with our cost savings efforts to date, but we know we have more work ahead," says Larry Johnston, chairman and CEO of Albertson's. During the first quarter, the grocery chain achieved sales of $10 billion as compared to $8.6 billion in last year's first quarter, an increase of 16%.
Similarly, net earnings from continuing operations rose 93% to $107 million, or 29 cents per diluted share, compared to $56 million or 15 cents per diluted share, in the first quarter of the prior year. The chain attributes the increase in sales andearnings to the acquisitions of Shaw's and its recovery from labor disputes in Southern California.
While Albertson's beat analysts expectations of 27 cents per share, the chain missed on top line growth projections of $10.25 billion, according to Thomson First Call.Albertson's store sales increased 1.8% during the quarter.
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