Kroger Co. and Albertsons Inc., the top U.S. grocers, Tuesday posted quarterly results stung by the labor dispute in Southern California and forecast a difficult year ahead because of labor turmoil and competition led by Wal-Mart Stores Inc.
Kroger, the No. 1 chain, based in Cincinnati, said a slew of charges related to the protracted dispute in California and an asset write-down for money-losing operations led to a net loss of $337.4 million, or 45 cents a share, in its fiscal fourth quarter ended Jan. 31.
Albertsons, the industry No. 2, based in Boise, Idaho, said fourth-quarter profit fell 37 percent from a year earlier as the California labor dispute stifled sales and pushed costs higher.
The five-month-long California dispute involved some 60,000 workers who went on strike or were locked out at Kroger, Albertsons and Safeway Inc. stores. The dispute was resolved on Feb. 29 when members of the United Food and Commercial Workers Union ratified a settlement.
Albertsons said it expects that profit in the year ending next January will be lower than the $1.51 per share it posted for the year just ended.
Kroger also said it anticipates lower earnings for the new year. Chief Executive Officer David Dillon said the company could not give a precise forecast because of uncertainties including the overall cost of the Southern California dispute, and the time and investment needed to rebuild the business of its Ralphs chain, which was targeted in the Southern California dispute.
Albertsons said it estimates that the Southern California labor troubles slashed its fourth-quarter profit by about $90 million, or 24 cents a share. Kroger said the dispute, combined with a West Virginia work stoppage, reduced its profit by $156.4 million.
Larry Johnston, Albertsons chief executive officer, said on CNBC that the supermarket industry had become difficult but his company would regain its footing as it cuts prices and launches a “very aggressive plan” to lure back customers it has lost in Southern California, one of the most competitive U.S. food markets.
He also said grocers had been aggressive in introducing a lower cost structure in Southern California, possibly creating a benchmark for driving down labor costs in the rest of the country.
Kroger said even with lackluster growth, 2004 could provide additional chances to cut costs in areas such as administration, labor, warehousing and transportation.
For the last three years, cost-cutting has topped grocers’ business plans as they try to wrest a growing share of the $775 billion U.S. grocery industry from nonunion megastores such as Wal-Mart.
