Nov. 22 (Bloomberg) -- Albertson's Inc., the grocer that put itself up for sale in September, reported the biggest profit decline in a year after failing to boost sales. The company cut its annual earnings forecast.

Net income at the second-largest U.S. grocery chain fell 30 percent to $77 million, or 21 cents a share, from $110 million, or 29 cents, a year earlier. Sales were little changed at $9.95 billion, the Boise, Idaho-based company said today in a statement.

Identical store sales fell for the second consecutive quarter as Albertson's lost customers to Wal-Mart Stores Inc. and Kroger Co., the largest U.S. grocer. Chief Executive Larry Johnston is seeking a buyer for the company after profit fell in three of the past four years and Wal-Mart moved into the grocery business, adding 1,000 supercenters since 2000 that sell food at low prices.

``They were right to try and shop it because they aren't getting the job done,'' said David Dietze, president of Summit, New Jersey-based Point View Financial Services, which manages about $95 million, including Albertson's shares. ``If there was ever a time to sell, this is probably not a bad time. Private equity is awash'' in cash.''

Lower Bids?

The company's results may ``challenge bid prices,'' Bear Stearns analyst Robert Summers, who has an ``underperform'' rating on the stock, wrote in a report today. ``In our view, continued uninspiring operational performance creates the prospect of reduced bid prices.''

Shares of Albertson's, which operates about 2,500 stores in 37 states under the names Jewel, Shaw's and Sav-on, fell 6 cents to $24.60 at 4:04 p.m. in New York Stock Exchange composite trading. They have risen 3.3 percent this year through yesterday. Shares of Cincinnati-based Kroger have climbed 11 percent, compared with an 18 percent jump for Pleasanton, California-based Safeway Inc.

Lehman Bros. analyst Meredith Adler expected 22 cents a share in profit for the quarter ended Nov. 3. She is the top- ranked retailing analyst by Institutional Investor magazine.

The average of 14 analysts surveyed by Thomson Financial was 27 cents. Thomson declined to disclose the parameters for the estimates in its survey.

Albertson's today cut its profit forecast for the year, saying it expects earnings excluding gains or losses from exiting businesses of as much as $1.40 a share. It earlier forecast earnings on that basis of as much as $1.47.

Hurricane Costs

The company said three hurricanes that hit Louisiana, Texas and Florida reduced earnings by 3 cents a share.

Identical-store sales, which exclude results at new, closed and replacement stores, fell 0.5 percent in the period. The company opened 7 stores, closed 18 and remodeled 41 in the quarter.

Gross margin, or the percentage of sales left after subtracting the cost of goods sold, widened to 28.12 percent from 27.93 percent a year earlier.

Selling, general and administrative expenses as a percentage of sales increased to 25.57 percent from 25.21 percent a year earlier.

For the first nine months of the year, net income rose to $284 million, or 76 cents, from $249 million, or 67 cents. Revenue climbed to $30.1 billion from $28.8 billion.

In addition to a sale of the company, Johnston, 57, is considering selling more stores. The grocer has been exiting cities where it doesn't have a No. 1 or No. 2 market share, including New Orleans; Omaha, Nebraska, and Jacksonville, Florida.

Wal-Mart's Push

During a strike in Southern California that began in 2003, Albertson's lost consumers to chains such as Whole Foods Market Inc. Sales as of June had not returned to levels before the strike.

``We believe there remains substantial long-term risk to equity holders due to the company's poor market share positions and its exposure to many markets where Wal-Mart is aggressively pushing its supercenter expansion, with current and future risk most especially on the West Coast and in the mountain states,'' said Adler, who is based in New York and rates the shares ``underweight.''

Kroger and No. 3 Safeway reacted more quickly to competition from Wal-Mart. Kroger slashed prices, while Safeway is trying to attract the upscale customers that shop at Whole Foods. It is remodeling stores with wood floors and softer lighting and adding more fresh produce.

Company's Value

Albertson's is valued at between $14 billion and $20 billion including debt, analysts and investors have said. The grocer owns the land and buildings occupied by 60 percent of its stores, most of which are in California, Illinois and Texas.

Wal-Mart has added full-line supermarkets to its main discount chain to become the top U.S. food retailer with a 17.4 percent share of the market, according to Progressive Grocer magazine.

Of 15 analysts tracked by Bloomberg, three have a ``buy'' rating on Albertson's shares, five say ``hold'' and seven say ``sell.'' The company twice missed analysts' estimates for quarterly profit in the prior four quarters, once beat and once matched.

Last Updated: November 22, 2005 16:06 EST