Struggling Albertson’s may put itself up for sale

BOISE — Albertson’s Inc. said Friday it was considering putting itself up for sale as well as other alternatives as the nation’s second-largest supermarket chain contends with sales that have lagged many of its rivals. Its shares surged 11 percent.

The company — which operates about 2,500 stores including Albertson’s, Acme, Shaw’s, Jewel-Osco and Sav-on Drugs — said it is interested in pursuing “strategic alternatives” to increase shareholder value. Albertson’s‘ board retained Goldman Sachs & Co. and Blackstone Group LP as financial advisers.

“We don’t expect to disclose any further developments until the board of directors has approved a definitive transaction,” said company spokesman David Parker.

Analysts said they were skeptical that Albertson’s could find a buyer for the entire company, the nation’s second-largest supermarket chain after Cincinnati-based Kroger Co.

In a note to investors released Friday, Prudential Equity Group retail food industry analysts Robert Campagnino and J. Michael Sesko wrote that “we hope neither Kroger nor Safeway would consider the acquisition.”

The company’s continued cost-cutting has failed to overcome its lagging performance in sales, they said.

“Albertson’s was our least favorite name among the conventional grocers and we see this decision by the company as an admission that the business isn’t performing particularly well and that the company lacks a clearly defined competitive advantage,” Campagnino and Sesko wrote.

In June, Albertson’s reported first-quarter earnings nearly tripled due to an acquisition and the continued recovery of the Southern California market after a major labor dispute. However, analysts said the company’s underlying sales with or without the Southern California stores are still not as good as its main competitors.

The company is recovering from a 4 1/2-month strike of 59,000 supermarket workers in California. The strike ended Feb. 29 when members of the United Food and Commercial Workers union ratified a contract with Albertson’s, Safeway Inc. and Kroger.

Albertson’s shares surged $2.32, or 11 percent, to close at $23.05 on the New York Stock Exchange. Its shares have traded in a 52-week range of $19.26 to $25.93.