Rating the Supermarkets

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Ever so slowly, the major grocery chains appear to be recovering from the Southern California supermarket strike that hit Ralphs, Albertson’s and Vons.


Safeway Inc., which operates Vons, recently reported that its first-quarter sales rose 12 percent from a year earlier, when the strike was just ending. It was the company’s biggest revenue increase since 2000. “Preliminary results far exceeded our expectations,” Banc of America analyst Bob Summers wrote in a research report. “While one quarter does not indicate a complete shift in the business, this marks a significant inflection point.”


Kroger Co., which operates Ralphs, recently reported that its fourth-quarter loss was smaller than first disclosed after it revised the cost of a writedown. Albertson’s Inc. raised its profit forecast for 2006 because it won’t expense stock options and is raising its top line with the purchase of two regional chains.


All of which only begins to address the ongoing challenges faced by the major chains as a result of losing so many customers during the 4 & #733;-month strike. Sharp price-cutting to bring back shoppers after the labor dispute was settled continues to have an impact at the bottom line as do pressures from discount chains such as Costco Wholesale Corp. and Wal-Mart Stores Inc.


Meanwhile, the regional chains that were not involved in the dispute and reaped huge sales gains have seen their numbers drop in recent quarters, though many remain ahead of where they were before the strike and lockout began. Arden Group Inc., parent of Gelson’s, reported fourth-quarter earnings per share of $1.16, versus $2.23 for the like period a year earlier, during the height of the labor dispute. Still, that’s a bit better than the $1.10 for the fourth quarter of 2002.


For many of the chains, cost cutting remains a key goal in mitigating the margin pressure. One area receiving special attention is employee-related costs, which was at the heart of the Southern California strike. What follows is a rundown on the financial performance of L.A.-area grocery chains and how each was impacted by the supermarket strike. It tracks quarterly net income at each before, during and after the strike.

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