Strike Hurts Albertsons, Bodes Ill for Competitors

If Albertsons (ABS Quote) earnings report on Friday is any indication, the strike in Southern California is having an even bigger-than-expected effect on the grocery chains.

Albertsons reported that its third-quarter earnings dropped 47% to 25 cents a share. A year ago, Albertsons earned 47 cents a share. Despite the strike, the company's sales did increase in the quarter, rising 1.6% to $8.79 million. But on a same-store basis, which compares results at like outlets open more than one year, Albertsons sales fell 0.8%.

The company's sales topped Wall Street's expectations of $8.76 billion in sales, but its earnings fell a whopping 12 cents a share short of consensus.

"The strike numbers were shocking in terms of the total amount it's costing," said Mark Hugh Sam, who covers the grocery chains as an analyst for Morningstar. (Morningstar does not do investment banking and Hugh Sam does not hold shares in the companies he covers.)

Albertsons' report could portend even worse results at rivals Safeway (SWY Quote) and Kroger (KR Quote): The strike affected more days of the quarter at both companies than at Albertsons -- Kroger's third quarter ended on Nov. 8, while Safeway's fourth quarter won't end until the end of this month. (Kroger reports its earnings Tuesday; Safeway reports next month.)

Meanwhile, 17% of Safeway stores are affected by the strike vs. 12% for Kroger and 11.2% for Albertsons.

Shares of all three of the grocery chains were down midday Friday. In recent trading, Albertsons shares were down 68 cents, or 3.2%, to $20.47. Safeway shares were down 23 cents, or 1.1%, to $20.09, while Kroger's stock was off 23 cents, or 1.3%, to $17.68.

Strike Marches On

Some 70,000 grocery workers in Southern California have been on strike since mid-October. The strike trimmed 23,000 jobs from Friday's nonfarm payroll data, the Labor Department said.