Albertson's: A Tasty Bite

By Gene G. Marcial

A Long Stale Spell
Albertson's (ABS ) supermarkets haven't been on investors' shopping lists for years. After hitting 67 in 1999, shares have languished between 20 and 30 -- and are now at 24. Stiff competition, exacerbated lately by Wal-Mart Stores (WMT )' entry into groceries and a long West Coast strike, has sunk the earnings.

No major Street analyst has a "buy" on the stock, but Kevin Lane of investment outfit Redwood Technimentals Research, which owns shares, sees a turnaround ahead. Store closings, cost-cutting, and smart acquisitions "have begun to show up in results," he says. Albertson's recent purchase of Shaw's Supermarkets, a 200-store chain, gives it a "strong footing in New England," says Redwood's Joseph Phillips. Albertson's owns 2,300 stores in 31 states -- and runs 228 gas stations.

With Shaw's, Phillips sees earnings of $1.49 a share in fiscal 2004 (ending Jan. 31, 2005) on sales of $38.1 billion, and $2.11 on $39.3 billion in 2005. Lane says the "long decline has built a multi-year base that suggests a bottom is in place." Albertson's is a good long-term play, he adds, and should rise to 51 in 12 to 18 months.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

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