SALT LAKE CITY, Nov. 14 /PRNewswire/ -- American Stores Company
(NYSE: ASC) today announced that its third quarter 1997 earnings results,
scheduled for release on November 25, 1997, will be below the prior year third
quarter results.  The Company expects to report earnings of between $.22 and
$.24 per share for the third quarter ended November 1, 1997 compared to $.26
per share in the prior year third quarter.
    Total sales for the third quarter 1997 were $4.6 billion, an increase of
1.9 percent over the third quarter of the prior year.  Total comparable store
sales increased .7 percent over the prior year.  Comparable store sales
increased 5.5 percent in its Drug Store Operations and decreased 1.2 percent
in its Food Store Operations.
    The Company anticipates that earnings in its Food Store Operations will be
down slightly compared to the prior year and, as a percent to sales, will be
equal to the prior year.  These earnings were achieved in a very difficult
sales environment.  Food sales were impacted  by food price deflation,
competitor promotional activity and increased competitive square footage.
    Drug Store earnings are expected to be below the prior year. The decrease
in Drug Store earnings was attributable to continued declines in gross margins
coupled with flat operating expenses.  Drug Store gross margins were down due
to industry-wide trends in pharmacy and disruption associated with the move of
the Drug Stores' marketing and procurement groups to Salt Lake City.  Expenses
were impacted by the Company's aggressive new drug store program.  The Company
is taking steps to address these issues.
    Chairman and Chief Executive Officer Victor L. Lund said, "I am obviously
disappointed in our earnings for the quarter.  However, I am relieved that
this shortfall is not the result of any weakness in our strategy.  I am
encouraged that our strategy is sound. Delta and our capital programs are
working. Importantly, our associates have positive attitudes and are driving
to regain our positive momentum as we move into 1998."

    Drug Store Operations
    Pharmacy margins declined as a result of the following industry-wide
trends: 1) increased third-party prescription business, with its lower
margins, increased as a percent of total pharmacy sales from 78.6 percent in
the prior year third quarter to 82.4 percent in the current quarter; 2)
declining reimbursement rates of Medicaid pharmacy plans in California where
the Company has significant pharmacy operations; and, 3) increased
introduction of new, lower-margin branded product replacing higher-margin
generics.  To counter the impact of reduced pharmacy margins, the Company is
seeking to continue to increase its gross margin dollars after labor cost per
prescription by:  1) continuing to decline to participate in unprofitable
third-party prescription plans; 2) aggressively seeking the most favorable
reimbursement rates in existing contract renewals; 3) continuing to emphasize
dispensing of higher margin generic prescriptions when possible; and, 4)
continuing to roll out its Pharmacy 2001 technology initiatives (such as
continued automation of the prescription filling process) that will reduce
labor costs and improve work flow efficiency.
    The Drug Store Operations were also affected by lower general merchandise
gross margins primarily due to the relocation of Drug Store marketing and
procurement functions to Salt Lake City.  This division was the last to
centralize its procurement function to Salt Lake City.  The Drug Store
Operations simultaneously completed the move of its marketing department to
Salt Lake City.  This was the only division to move marketing positions. The
combined moves involved approximately 260 associate positions, of which
only 86 existing associates transferred from Chicago to Salt Lake City.  The
remaining positions were filled with new hires.  Throughout the transition,
the goal of the marketing and procurement teams was to continue a high level
of customer service.  Their focus was therefore on sales and product delivery.
Unfortunately, the transition resulted in a loss of focus on margins and the
gross profit results for the quarter were lower than expected.  The issues
surrounding product pricing and promotion are being addressed and marketing
plans for the fourth quarter should reflect the corrections.  Additional
training and oversight of new personnel and careful review of all marketing
plans are being implemented.
    During the past several years, the Company has been aggressively opening
more new drug stores. New drug stores generally take three years to reach
profitability.  These accelerated openings are expected to enhance future
earnings, particularly the combination stores where the drug store side
reaches profitability at a faster rate than stand alone drug stores.  In
addition, during the last two years, the Company entered two new drug store
markets -- Des Moines and Milwaukee.
    The capital ramp-up is now complete, and the Company's plan for the next
two years focuses on drug store growth in existing markets, and in particular
on combination stores.  The Company will also increase efforts to reduce new
store operating expenses to bring them to profitability sooner.  The combined
effect of these plans is expected to reduce the amount of initial losses in
new stores.
    The Company's new drug stores have put pressure on operating expenses as a
percent of sales.  The existing store base expense ratios have been declining
as a percent of sales; however, the Company believes that there is opportunity
to reduce operating expenses at both new and existing stores.  The Company is
committed to reducing its operating expenses and has established specific
targets for these reductions, including reduced labor hours through improved
technology and a thorough review of the Company's administrative and overhead
structure.

    Food Store Operations
    Despite aggressive retail price adjustments implemented to protect its
share, the Company's operating profit margin percent is expected to be flat
compared to the prior year.  Total Food Store sales were down 1.3 percent due
to continued food price deflation, heavy competitor promotional activity,
closed or sold stores and the increased competitive square footage.  The
Company's strategy has consistently been to remain competitive in pricing and
to retain market share in its key markets. The Company believes it is
maintaining or growing its market share compared with its primary grocery
competitors.
    Food Store Operations are expected to benefit in future quarters from the
Company's continued capital expenditure program that will increase net retail
square footage, add to total Food Store sales and provide leverage for
operating expenses. During the quarter, the Company opened 9 combination
stores and one supermarket, closed or sold 12 food stores and completed 23
food store remodels.  A total of 17 new food stores are planned to open in the
fourth quarter for a total of 40 food stores for 1997.
    In addition to the benefits of its capital expenditure plan, the Company
believes it will continue to see improvement through the growth and
development of its customer loyalty card programs and through the leveraging
of its Delta initiatives across its divisions.

    Delta/Capital Plan
The Company reported that its various supply chain re-engineering and self-
consolidation initiatives (the Delta Program) are on track. The Company
believes that Delta provided crucial added resources to aggressively invest in
margins and retain and grow market share.
    Benefits from the Company's centralized buying group continue to reduce
product cost.  In an effort to continue to leverage its volume, the Company's
first nationally coordinated promotion across all operating divisions
commenced early in the fourth quarter. The Company expects this program to
improve gross margin dollars due to added sales volumes, as well as to reduce
costs from the centralized buying effort.  This is the first of many such
national promotions that will continue to take advantage of the Company's
consolidated buying power.
    The Company believes that its other Delta projects such as the warehouse
consolidation project, labor scheduling system and customer data repository
will improve operating performance and efficiency.
    Further, the Company continues to believe that its total capital spending
program will be accretive to 1998 earnings.

    Business Outlook
The Company expects the fourth quarter 1997 earnings to be down from the prior
year fourth quarter consistent with the shortfall in the third quarter.  The
Company currently estimates that 1998 year over year increase in earnings will
be 10 to 15 percent based on the current competitive and deflationary
environment.  Earnings improvements are expected to be achieved through
aggressive management of pharmacy and general merchandise margins and
operating expenses; maturation of the Company s capital expenditure program;
and continued roll-out of the Delta Program initiatives.
    American Stores Company is one of the nation's largest food and drug
retailers.  It operates 1,714 stores in 27 states, including 173 jointly
operated combination stores each of which is counted as two stores.  Its
principal retail operations include Acme Markets, Jewel Food Stores, Lucky
Northern California Division, Lucky Southern California Division, Jewel Osco
Southwest, Osco Drug and Sav-on.

    Cautionary Note:  This press release contains certain forward-looking
statements about the future performance of the Company which are based on
management's assumptions and beliefs in light of the information currently
available to it.  The Company assumes no obligation to update the information
contained herein.  These forward-looking statements are subject to
uncertainties and other factors that could cause actual results to differ
materially from such statements including, but not limited to: competitive
practices and pricing in the food and drug industries generally and
particularly in the Company's principal markets; the implementation of the
Company's Delta initiatives in accordance with the currently contemplated
schedule and budget; the Company's relationship with its employees and the
terms of future collective bargaining agreements; the costs and other effects
of legal and administrative cases and proceedings; the nature and extent of
continued consolidation of the food and drug industry; changes in the
financial markets related to the cost of the Company's capital; the ability of
the Company to access the public debt and equity markets to refinance
indebtedness and fund the Company's capital expenditure program on
satisfactory terms; supply or quality control problems with the Company's
vendors; and changes in economic conditions which affect the buying patterns
of the Company's customers.

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