UBS Warburg downgraded Albertsons (ABS ) to sell from reduce.
On Thursday the company said third quarter earnings per share is likely to fall 5%-10% below the current guidance on weaker than expected sales.
Analyst Neil Currie says due to the company's deteriorating sales, he expects that significant gross margin reinvestment is needed to turn the situation around. He says despite the share price falling by 18% after the company's announcement, valuation remains at a price-earnings premium to Kroger and Safeway.
Currie say he sees no reason for such a premium. Given Albertsons' sales decline and management's slowness to recognize its problems, he cut the $2.26 fiscal 2003 (Jan.) earnings per share estimate to $2.10, and cut the $2.30 fiscal 2004 estimate to $1.80. He also cut the $22 target to $16.