Working hard to make life easier for our customers

2004 ANNUAL REPORT How do we define easier?

Fresh new products and ideas. Faster, more convenient service options. Better value on everyday shopping needs. More choices to suit more lifestyles than ever before.

These are the ideas reshaping our enterprise, re-energizing our associates and redefining our brand promise at today.

Around the store, around the neighborhood, across a vast enterprise, everyone at Albertsons is working hard to make life easier for our customers. 11010_PGS.01-17.1 5/11/05 7:58 PM Page 1

It’s a fresher shopping experience… 11010_PGS.01-17.1 5/11/05 7:58 PM Page 2

with a wild harvest of organic choices... 11010_PGS.01-17.1 5/11/05 7:58 PM Page 3

a leading edge store design to serve every neighborhood’s needs. 11010_PGS.01-17.1 5/11/05 7:58 PM Page 4

It’s a faster response... 11010_PGS.01-17.1 5/11/05 7:59 PM Page 5

with 24 hour pharmacy service...

and a fast lane self-checkout... 11010_PGS.01-17.1 5/11/05 7:59 PM Page 6

with convenient service options built into every store. 11010_PGS.01-17.1 5/11/05 7:59 PM Page 7

It’s bigger, better, broader value on items you buy every week. 11010_PGS.01-17.1 5/11/05 7:59 PM Page 8

It’s a premium quality product line minus the premium price... 11010_PGS.01-17.1 5/11/05 7:59 PM Page 9

and 10 for $10 national specials to stock your pantry shelves. 11010_PGS.01-17.1 5/11/05 7:59 PM Page 10

It’s more choices for more lifestyles than ever before… 11010_PGS.01-17.1 5/11/05 8:00 PM Page 11

with strong brand partnerships 11010_PGS.01-17.1 5/11/05 8:00 PM Page 12

and a low price format from Super Saver... 11010_PGS.01-17.1 5/11/05 8:00 PM Page 13

with exciting new banners, from Shaw’s...

to . 11010_PGS.01-17.1 5/11/05 8:00 PM Page 14

page 14 ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers

Larry Johnston Chairman of the Board, Chief Executive Officer & President 11010_PGS.01-17.1 5/11/05 8:00 PM Page 15

ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers page 15

Letter to Shareholders

As I travel the country visiting our stores, I’m sometimes asked, “Larry, have we hit the target? Is the restructuring over? When is the transformation complete?”

My answer is always the same — Never!

When you operate in an industry that is constantly changing, you must have an organization that is always adapting. Most importantly, when you serve a target customer who is constantly redefining her needs — not to mention discovering new ones — you need a team that never stops innovating!

That’s the kind of enterprise we’re building today at Albertsons. Let me give you a progress report on what turned out to be another economically and competitively challenging year for food and drug retailers. Our 240,000+ associates continued their focus on the five imperatives that drive our success: 1) A customer-focused approach to growth; 2) aggressive cost and process control; 3) maximize return on invested capital; 4) a company-wide focus on technology; and 5) energized associates. Here’s what was accomplished during the year!

 Tot al sales grew +14% to $39.9 billion.  Cash flow from operations grew +38% to $2.1 billion.  Delivered total net earnings from continuing operations of $474 million or $1.28 per diluted share, despite the challenges associated with the largest labor dispute in the industry’s history and the four hurricanes that hit Florida.  Tot al square footage grew +11% to 104.2 million square feet.  $1.3 billion was invested in new company infrastructure and technology.  We paid a dividend with an average yield of 3.2%, ranking Albertsons in the top 20% of S&P 500 companies. This, coupled with our 5.4% increase in market value during calendar 2004, gave our shareholders a total return of over 8%.  Our share of the important grocery market returned to historical levels and above, following the labor dispute.  Our core grocery business was expanded on both a geographic and a market segmentation basis as we completed the acquisitions of Shaw’s and Bristol Farms and also launched a new price-impact format, Super Saver.  We passed the $1 billion mark in total cost savings since the turnaround of our company began in mid 2001, reaching the target one full year ahead of schedule. 11010_PGS.01-17.1 5/11/05 8:00 PM Page 16

page 16 ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers

 The rollout began for a new industry-leading pharmacy buy of the week” promotions have in some cases automation system that is revolutionizing how we serve been so successful that we have literally sold out the customers, ultimately providing them with access to their available inventories of our suppliers. prescriptions, account information and pharmacy records at any of our 2,000 pharmacies, by telephone or via any Our ability to design and implement such effective computer they wish to use. customer focused programs is, in turn, a direct result  Finally, in one of my proudest moments since taking the of the significant progress we have made in building helm at Albertsons four years ago, I watched in awe and a faster, better integrated consumer demand chain. respect as our Florida associates and the men and women The speed and efficacy with which we are monitor- across our enterprise who support them, pulled together ing consumer desires and meeting them with compet- in a truly heroic effort to reopen our Florida stores in itively priced merchandise is growing every day. areas of the state that were ravaged by four consecutive Price optimization and promotional effectiveness hurricanes. Despite personal loss and tremendous physical tools are just two dimensions of our new surgical obstacles, they had almost every one of our hurricane- pricing systems. Our increasing power to move large affected stores reopened and serving critical customer volumes of product in effective, nationally coordi- needs within 48 hours. nated promotions has also caught the attention of our vendors. As these coordinated promotions What was perhaps most exciting about 2004 was become better integrated into our consumer demand that we began to see the mounting impact of our five chain, opportunities to capture even greater savings strategic imperatives, and how their applications are will continue to emerge. beginning to drive change across the vast Albertsons In addition to better value, Albertsons customers enterprise. now have more choices than ever before in how and That impact centered directly on our customers – where they shop. During 2004 we continued the the focus of everything we do at Albertsons today. rollout of our new Renaissance drugstore format. Following more than three years of success in extract- This new format provides a more exciting shopping ing costs from our operations, last year we accelerated experience through the addition of enhanced beauty the reinvestment of a substantial portion of those care, digital photo and an expanded food offering. savings in nationally coordinated pricing and mer- Nearly 100 drugstores as well as the drug side of chandising strategies that are putting smiles on the our grocery stores now include elements of the faces of our customers and vendors, while boosting Renaissance format. our market share. In April 2004, we completed the acquisition of a At the heart of this strategy is a new pricing program. highly regarded food retailer with market-leading “Check the Price” is simply a commitment to deliver positions in the six New England states where it competitive, everyday value pricing on a broad array operates. The Shaw’s chain is an of items that our customers buy every week. This is a innovative merchandiser and marketer that brings long-term strategy designed to win customer loyalty significant synergies and human capital to the and the early results have been very encouraging. Not Albertsons leadership team. We acquired the com- only are we recapturing old customers and attracting pany for approximately $2.5 billion, an investment new ones, but we’re also delivering significant base that was immediately accretive to consolidated sales growth in affected product items and categories. earnings. By the end of the third year following deal closure, the Shaw’s acquisition is expected to Other, more targeted merchandising programs deliver annual savings in operating expenses of have been equally successful in both food and drug $100 to $125 million. The integration is on track stores. Our weekly “10 for $10 Sale Mix or MatchSM ” and actually delivering synergies ahead of schedule. program encourages customers to stock their pantries at competitive prices. In addition, our “extreme value 11010_PGS.01-17.1 5/11/05 8:00 PM Page 17

ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers page 17

In September, we also entered the price impact installed. Meanwhile, our Shop 'n' Scan system is segment, launching our new Super Saver chain with being used by consumers in over 100 stores primarily the opening of the first seven locations in Texas and in the Dallas-Fort Worth metroplex as we test new Louisiana. This new format is operated through an applications and ready the system for expansion. independently managed entity and offers a limited assortment of high quality food items, and when The company also made major strides in 2004 to space allows, an Osco or Sav-on pharmacy in a further energize associates and develop a stronger bright, clean environment with minimal services in bond in the communities where we live and work. order to hold down overall operating costs. These Over 7,000 leaders have now attended the Successful stores are a direct response to our most price-sensitive Life Course and are certified ambassadors to spread customers. The design and merchandise assortment its concepts of inspired daily living across our directly reflects the desires of this customer segment. company. In addition, our associates continued to We expect this chain will grow aggressively. strengthen our community involvement through our CORUS volunteer network, by donating over Also in September, we acquired Bristol Farms, 1,000,000 volunteer hours to needy causes. Across a highly successful fresh, gourmet and specialty the company our 33 affinity groups also continued food retailer located in Southern California. This to provide mentoring opportunities for our female innovative chain of 11 stores serves an affluent and and minority associates. demanding clientele in cities like Newport Beach, with one-of-a-kind products that range from prime All of the accomplishments that I’ve described for you Japanese Kobe beef to freshly prepared hot and here merely scratch the surface of what is happening cold foods reflecting the rainbow of cultures repre- at Albertsons today. I hope they give you a flavor of sented in the area. We acquired Bristol Farms with just how ingrained the spirit of change is and how its management team intact and will continue to the drive for constant innovation has permeated our operate it as an independently managed subsidiary. enterprise. This change and innovation is the fuel that We also expect to learn many valuable lessons from will continue to drive our success. this high-end niche marketer, operating in one of Each day, in thousands of ways large and small, we’re the fastest growing segments of our industry today. transforming our company across a wide spectrum Technology also remains an important strategic of dimensions, all focused on redefining our brand imperative at Albertsons, both to strengthen connec- promise to make life easier for our customers. Rising tions with our customers and to make their lives every morning with a positive attitude our associates easier. We continue to be the largest online grocer are creating a “Terrific” environment to shop in. As in the industry today, measured by geographic reach, always, I invite you to come in and see the difference with online ordering and delivery services in major that such passion and commitment can make! metropolitan areas across the United States. Last year we expanded service into Philadelphia, Phoenix, Sacramento, New Jersey, Palm Springs, Salt Lake City and Santa Barbara.

Within our stores, technology plays an increasingly important role in the services we offer customers, from the speed and convenience of self-checkout Larry Johnston to the revolutionary capabilities of our wireless Shop Chairman of the Board, 'n' Scan shopping system to our new ARx pharmacy Chief Executive Officer & President automation system. More than 60% of our food stores now feature a self-checkout option with 4,600 lanes 11010_PGS.18-34.2 5/11/05 8:02 PM Page 18

page 18 ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers

Strategic Imperative #1: Focusing on Customers to Drive Growth

Every week, in tens of millions of homes across America, a decision is made about where to shop for the family’s food and health needs..... and every week, millions of consumers are discovering new reasons to choose the Albertsons family of brands.

We begin with a single brand promise – to make life easier for our customers. It’s a commitment that keeps us constantly innovating – expanding the choices we offer and sharpening the value proposition of those choices for our customers. That commitment has recently been given fresh meaning for millions of our shoppers across the United States as they discover our new pricing initiatives. “Check the Price” has established better values on hundreds of products our cus- tomers buy most frequently. “10 for $10” promotions encourage customers to re-stock their pantries more conveniently and our “extreme value buy of the week” moves tremendous volumes of targeted items through our national network of stores. Our customers are voicing their enthusiastic approval by significantly boosting purchases of these items and related product offerings.

Broader choice is also a theme becoming more visible throughout our stores. It can be seen in our new boutique specialty departments, including “Wild HarvestSM ” natural and organic foods and “Shop the World Food Hall®” international foods. It is apparent in the range of top consumer brands who partner with us in-store, from Starbucks® to Toys “R” Us®. It’s also clear in the depth and breadth of our own branded products, including our premium quality essensia™ brand, our value-priced equaline™ healthcare products and the all new HomeLife™ general Albertsons customers can now “Shop the World” merchandise brand. for their favorite international foods and seasonings. Boutique-style specialty displays Greater convenience and more personalized service like this appeal to a wide variety of shoppers. are also on display at Albertsons today. Our neighborhood marketing programs tailor product selections to local kosher, Hispanic, African-American and Asian tastes. New technology- enabled services, from online shopping and home delivery to in-store Shop 'n' Scan and self-checkout options, put us firmly in the ranks of the most progressive retailers in the world. 11010_PGS.18-34.2 5/11/05 8:02 PM Page 19

ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers page 19

Light, bright, attractive store design encourages browsing and enhances the pleasure of shopping in our health and beauty sections.

Our neighborhood marketing strategies deliver unique selections of foods and services to suit local shoppers’ needs. This kosher super- vised deli is one of many we operate in Jewish neighborhoods across the country. 11010_PGS.18-34.2 5/11/05 8:02 PM Page 20

page 20 ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers

Strategic Imperative #2: Pursuing Aggressive Cost and Process Control

American consumers today enjoy a revolution in retailing productivity that is delivering higher quality, greater Albertsons is the first food and drug retailer variety and better value than they have ever seen. It’s a force that to adopt a company-wide Six Sigma effort. is transforming the retail food and drug industries. Albertsons is This highly acclaimed quality program now drives determined to be a leader in the revolution. numerous individual initiatives covering every corner of the enterprise. Our company began this journey four years ago, launching a series of initiatives to drive costs out of our opera- tions, streamline the processes by which we source, distribute and merchandise our products, and deploy innovative new tools to better understand and serve our customers. Since then, we have removed more than $1 billion in cost from our operating systems, freeing up these funds for productive reinvestment in our enterprise.

Investment in our consumer demand chain – the multiple, interlocking processes of marketing, merchandising and supply chain, remains a key priority. Last year, we continued to build a centralized procurement process that leverages our collective buying power and lowers our costs across entire product and service categories. We also continued to develop a more disciplined business planning process that utilizes stronger collaborations with key vendors to execute national promotions that capture the full power of consistent execution at our more than 2,500 stores. Most exciting of all, we exercised our growing capabilities in pricing and promotional optimization to reinvest a substantial portion of our cost savings in lower prices across a broad array of the products our customers purchase most frequently. These are the products that are most influential in determining where consumers choose to shop. We believe that large scale, carefully calibrated and strategically executed pricing programs like this have the power to significantly enhance our competitive posture, against both traditional food retailers, as well as non-traditional competition. Finally, continuous improvement is fast becoming a competitive imperative in the retailing revolution. Last We are focused on streamlining our consumer year, Albertsons became the first food and drug retailer to adopt demand chain, including improving distribution the well known continuous quality disciplines of Six Sigma. center efficiencies and consolidating distribution operations. We already have 50 Black Belts deployed, working on important projects, and expect to train many more during 2005. 11010_PGS.18-34.2 5/11/05 8:02 PM Page 21

ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers page 21

Radio Frequency Identification (RFID) systems represent the leading edge in efficient, real-time inventory management. Albertsons is testing RFID applications with several top suppliers. 11010_PGS.18-34.2 5/11/05 8:02 PM Page 22

page 22 ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers

Strategic Imperative #3: Company-Wide Focus on Technology

Today, technology is transforming the way we operate at Albertsons. Leading-edge technology solutions are advancing the efficiency of our operations, expanding intelligence of our enterprise, and revolutionizing the services we provide. Shop 'n' Scan handheld scanning devices are precursors to a wireless future in which customers For our customers, technology-enabled innovation will enjoy fully integrated communications linking means greater convenience, more choices and a better value online and in-store shopping services. proposition. Our state-of-the art pharmacy automation systems, for example, can identify customers, verify insurance reimburse- ment, and fill hundreds of commonly requested prescriptions quickly and accurately. We’ve now begun deployment of a next- generation electronic pharmacy platform that, ultimately, will connect our customers to their accounts via telephone, computer or any of our 2,000 Sav-on and Osco retail pharmacies. New customer-controlled technologies are also appearing in many of our and drugstores. More than 60% of our food stores now offer the convenience of self-checkout. All our new Renaissance format drugstores feature digital photo cropping and printing kiosks. We also continue to lead the industry in the deployment of wireless personal shopping technologies. Our Shop 'n' Scan handheld shopping device, currently available in many of our Dallas- Fort Worth and Chicago stores, puts more information, better value and greater budgetary control into the hands of our customers as they shop, while deepening our understanding of their buying patterns and product needs. In many major markets across the country, from Los Angeles to Philadelphia, shopping at Albertsons also means online ordering and convenient home delivery of groceries and health care items. During 2004, we expanded our e-commerce capabilities to many new metropolitan markets. Based on our expanding geographic reach, Albertsons remains the number one e-commerce grocer in the United States. Our website was also ranked third as the easiest internet site to shop in 2004 by Customer Respect Group. Understanding customer shopping patterns and For the management of our enterprise, advanced preferences can improve every aspect of our busi- ness from pricing strategies to inventory control. technologies, such as a real-time data warehouse, form a crucial Our enterprise data warehouse is one of the largest platform to learn, communicate and act with increasing speed of its kind in the world. and efficiency. This technology leadership process touches every link in our operations and builds on itself with every new investment we make. 11010_PGS.18-34.2 5/11/05 8:02 PM Page 23

ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers page 23

Albertsons extended its online shopping and home delivery services to many new markets in 2004. We remain the number one e-commerce grocer in the United States today based on geographic reach. 11010_PGS.18-34.2 5/11/05 8:02 PM Page 24

page 24 ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers

Strategic Imperative #4: Maximizing Return on Invested Capital

The Albertsons family of food and drugstore banners includes some of the most widely recognized and trusted names in American retailing. Building the market share and enhancing the long-term earnings power of this enterprise remains a crucial We continue to expand our Sav-on drugstore imperative. chain into areas in California and Nevada. The Sav-on brand ranks among the most visible Last year, we invested $1.3 billion in projects to build and trusted names in drugstore retailing. and remodel stores, improve our operational effectiveness, and enhance the skills of our associates. We also added significantly to the size and breadth of our asset portfolio through both acquisition and the creation of a new retailing format. In early 2004, we acquired one of New England’s leading food retailers, the 200-store Shaw’s supermarket chain, for approximately $2.5 billion. This transaction expanded the Albertsons footprint into six northeastern states, enriched our bench of industry talent and created multiple opportunities for the cross-fertilization of each organization’s best practices. By the end of year three following the acquisition, we expect to achieve operational savings of between $100 and $125 million. Our second acquisition, a specialty gourmet retail chain serving Southern California’s most affluent shoppers, was smaller in scale but strategically significant. Bristol Farms generates far above average industry margins in its unique retailing niche and opens a door for Albertsons into one of the fastest growing segments of the retail food industry. We also launched a new chain of high volume, price-impact stores last year to serve our most price-sensitive customers. In mid-2004, our independently managed Extreme Inc. subsidiary opened its first Super Saver grocery stores in Texas and Louisiana. This format is designed to deliver a limited range of foods and services in a comfortable, uncluttered Building innovative food and drug retailing centers environment at the lowest possible prices. As the new chain gains in high-density, affluent locations, like this new traction, we expect it will build out aggressively in other markets. Albertsons in downtown San Francisco, delivers strong returns on invested capital. Our exciting new Renaissance drugstore format also continues to win high marks from customers for convenience and pleasure. As we learn from this platform, new innovations in store formats are likely to emerge to capture specific opportunities in the increasingly diverse retailing universe we serve. 11010_PGS.18-34.2 5/11/05 8:02 PM Page 25

ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers page 25

The acquisition of Shaw’s in early 2004 expanded our footprint into the six New England states and added one of the top-performing U.S. supermarket chains to the Albertsons family of store banners. 11010_PGS.18-34.2 5/11/05 8:02 PM Page 26

page 26 ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers

Strategic Imperative #5: Energized Associates

Our customers measure us by the passion, energy and commitment of our individual associates. That’s how we like it. We believe in the power of highly motivated individuals who can Each year Albertsons associates from across deliver superior customer service, make better decisions and build the United States compete in a hotly contested a stronger, more productive enterprise. It’s a belief that permeates “Service Challenge”. The competition is one our operating culture and influences every new hire and promotion more opportunity to recognize and highlight outstanding customer service. we make. Putting the right people in the right jobs begins at the store level. Our store associates act as daily ambassadors to our customers and also represent our largest and most important source of talent and diversity for the future leadership of the company. Recruiting and retaining top performing associates is an ongoing challenge that we have tackled in recent years with the adoption of a proprietary, interactive recruitment system, Unicru. Focused on the positive, service-oriented attitudes we prize, this new system has proven highly effective in delivering a strong pool of candidates. We have adapted the system for recruiting efforts across the company and have introduced it to all 2,500 stores, including our recently acquired Shaw’s and banners. Diversity in all its forms is particularly prized at Albertsons. Fresh ideas thrive best in a culture where diverse points of view are respected and encouraged. On average we serve the shopping baskets of 30 million Americans each week. To understand their individual needs, our team must reflect their individual values and their diverse cultural back- grounds. Diversity at Albertsons is an everyday reality, visible in the people we hire, the range of ideas we embrace and the customers we serve. Providing the right development tools as we navigate the constant change that is a permanent part of modern retailing is also a crucial issue at Albertsons today. We never stop Albertsons associates are encouraged to learn every aspect of their store’s operations. Top performers building educational tools and programs to help new and existing remain the most important source of talent for the associates develop professionally and reach their highest poten- future leadership of the company. tial. Leadership aptitude is sought out and carefully monitored as leaders at every level of our company are required to practice continual succession planning for themselves and for key positions in their organizations. 11010_PGS.18-34.2 5/11/05 8:03 PM Page 27

ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers page 27

Serving customers well is a passion among Albertsons’ more than 240,000 associates and a driving force on our path to become the best food and drug retailer in the world. 11010_PGS.18-34.2 5/11/05 8:03 PM Page 28

page 28 ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers

Corporate Leadership and Community Involvement

For decades at Albertsons, we’ve built our food and drug retailing enterprise around the individual needs of the More than 300 Albertsons associates gathered communities we serve. Connecting deeply at the local level not last year for a women’s affinity group kick-off only makes us better retailers, it also makes us better leaders and meeting in Boise, Idaho. The group, known as better people. M.E.S.A., is dedicated to mentoring, encouraging, and supporting female associates as they strive That connection was on clear display last fall as 89 to achieve personal and professional goals. Albertsons stores in 10 Florida communities were ravaged by four consecutive hurricanes. Despite huge personal loss and severe destruction of company facilities, Albertsons associates from different divisions across the nation joined together to help reopen stores – most within 48 hours – and deliver crucial food, water and health supplies to our customers. To support our own associ- ates most affected by the hurricanes, Albertsons established a hurricane assistance fund that distributed $1 million in aid. Leadership often begins through personal connections made at the local level. Minority and female associates often find the support and encouragement they need to build strong and THE IDAHO STATESMAN satisfying careers through one of the more than 33 affinity groups SUNDAY 01.16.05 the company supports across our enterprise. Albertsons leads the Individual leadership also finds expression at way for women Albertsons through community involvement. Our CORUS volunteer network, with 165 associate chapters across the Albertsons topped the United States, organizes and manages a range of volunteer list of the world’s 200 largest services that include hunger relief, after-school programs and companies for having the an annual service day. During 2004, our associates donated most women — and the highest more than 1,000,000 hours of community service. percentage of women, 54.5% — on its board. Hunger relief also remains a key focus for Albertsons. Last year, the company became the first food retailer in the United States to initiate a nationwide “fresh rescue” program, 54.5% enabling the donation of limited-shelf-life dairy and meat products to the local food banks of America’s Second Harvest. Meat and dairy are often the most difficult items for local food banks to acquire. In 2004, Albertsons distributed more than 25 million pounds of food to food banks across the nation.

Health and nutrition also play a strong role in our community support. Last fall, Albertsons launched a program to promote healthy eating habits among school children, sponsoring “healthy eating” field trips that teach students how to shop for and create balanced meals. The company expects to reach more than 100,000 children during the 2004-2005 school year. 11010_PGS.18-34.2 5/11/05 8:03 PM Page 29

ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers page 29

Partnering with Habitat for Humanity, Albertsons associates used 110,250 nails, (pictured below, left) Albertsons 5,200 feet of 2X4’s, 2,500 shingles, 56 associates helped with landscaping quarts of paint and nine days of hard work at the Children’s Home Society to create a new home for a Dallas family. Crisis Nursery in Orlando, Florida The project was part of a company-wide as part of last year’s CORUS CORUS Day of Caring held last year. Day of Caring.

Every year thousands of Albertsons asso- ciates participate in community walks and runs, like this Race for the Cure, to raise money for worthy causes.

(pictured below) More than 30 affinity groups shared best practices and cele- brated accomplishments at Albertsons’ third annual Affinity Group Forum held last October in Scottsdale, Arizona. The groups provide associates with mentoring and networking opportunities.

(pictured left) Albertsons associ- ates from across the country traveled to Florida last fall to help clean up and restock the shelves of stores affected by four powerful hurricanes. 11010_PGS.18-34.2 5/11/05 8:03 PM Page 30

page 30 ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers

Financial Highlights

Fiscal Year Fiscal Year (dollars in millions, except per share data) 2004 2003 % Change

Sales $39,897 $35,107 +13.6 Net Earnings $ 444 $ 556 -20.2 Net Earnings % to Sales 1.11% 1.58% -29.7 EPS – Basic $ 1.20 $ 1.51 -20.5 EPS – Diluted $ 1.19 $ 1.51 -21.2 Dividends Per Share $ 0.76 $ 0.76 0.0 Total Assets $18,311 $15,666 +16.9 Stockholders’ Equity $ 5,421 $ 5,381 +0.8 Common Shares Outstanding at Year End 368,265,000 367,519,000 +0.2 Number of Stores 2,503 2,305 +8.6 Number of Associates 241,000 198,000 +21.7 Average Store Size (square foot): Food and Drug Stores 50,700 50,600 +0.2 Drug Stores 18,400 18,500 -0.5 Other* 39,200 – N/A All Stores 41,600 40,800 +2.0 * Consists of Bristol Farms and Extreme Inc. locations, which are operated independently.

Sales Net Earnings Diluted Earnings (dollars in billions) (dollars in millions) Per Share (dollars)

$39.9 $556 $1.51

$444 $1.19

$35.1

03 04 03 04 03 04

Corporate Profile

Albertsons is one of the largest retail food and drug chains in the world. The company operates 2,503 stores in 37 states across the country. Retail operations are supported by 19 major company-owned distribution centers. Albertsons is headquartered in Boise, Idaho, and employs approximately 240,000 people. The company’s stock is traded on both the New York Stock Exchange and Pacific Stock Exchange under the symbol ABS.

Operating Area (yellow states)

2004 Square Footage 2004 Number of Stores by Store Format by Store Format

I Food & Drug 86.9% I Food & Drug 1,786 I Drug Stores 12.3% I Drug Stores 695 I Other* 0.8% I Other* 22

*Consists of Bristol Farms and Extreme Inc. locations, which are operated independently. 11010_PGS.18-34.2 5/11/05 8:03 PM Page 31

ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers page 31

Albertsons Family of Brands

*

*

* Operated independently page 32 ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers

Executive Officers

Back row: Larry Johnston, Gabe Gabriel, Paul Gannon, Kevin Tripp Middle row: Bob Butler, Roe Cefalo, John Sims, Bob Dunst Front row: Kathy Herbert, Duncan MacNaughton, Felicia Thornton

Larry Johnston Bob Dunst John Sims Chairman of the Board, Executive Vice President Executive Vice President Chief Executive Officer & Chief Technology Officer & General Counsel & President Gabe Gabriel Felicia Thornton Bob Butler Executive Vice President, Executive Vice President Executive Vice President, Supply Chain and Asset & Chief Financial Officer Food Operations & Management President, Intermountain Kevin Tripp West Division Paul Gannon Executive Vice President, Executive Vice President Drugstore Operations & Roe Cefalo & Chief Marketing Officer President, Drug Division Executive Vice President, Real Estate, Development Kathy Herbert and New Store Formats Executive Vice President, Human Resources

Duncan MacNaughton Executive Vice President, Merchandising ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers page 33

Board of Directors

Back row: Gary Ames, Jon Madonna, Hank Bryant, Larry Johnston, Paul Corddry Front row: Teresa Beck, Beth Pritchard, Pam Bailey, Betty Rivera, Kathi Seifert, Bonnie Hill

Gary Ames Paul Corddry Beth Pritchard EXECUTIVE COMMITTEE Retired President & Retired Senior Vice President, President & Chief Executive Larry Johnston, Chair Chief Executive Officer of Europe, of H.J. Heinz Company Officer of Organized Living, Gary Ames MediaOne International (a (a worldwide provider of Incorporated (a retailer of Teresa Beck telecommunications company) processed food products and home and office storage and Hank Bryant services) organization products) Paul Corddry Pam Bailey AUDIT/FINANCE COMMITTEE Chief Executive Officer & Bonnie Hill Betty Rivera Hank Bryant, Chair President of the Cosmetic, President of B. Hill Enterprises, Member of Energy Resource Pam Bailey Toiletry and Fragrance LLC (a consulting firm special- Associates, LLC (an energy Teresa Beck Association (the global trade izing in corporate governance consulting firm) and formerly Jon Madonna association for the personal and board organizational and Cabinet Secretary of the Beth Pritchard care products industry) public policy issues); Co-Founder, Energy, Minerals & Natural Icon Blue, Incorporated (custom Resources Department of the MANAGEMENT DEVELOPMENT/ Teresa Beck marketing promotional solu- State of New Mexico COMPENSATION COMMITTEE Retired President of American tions); and Retired President Gary Ames, Chair Stores Company (a food and of The Times Mirror Foundation Kathi Seifert Pam Bailey drug retailer) Chairman of the Board of Paul Corddry Larry Johnston Pinnacle Perspectives, LLC Bonnie Hill Hank Bryant Chairman of the Board, (a personal business consulting Beth Pritchard Retired Managing Director in Chief Executive Officer & company); and Retired Executive Betty Rivera the Corporate Finance Unit of President of the Company Vice President of Kimberly-Clark Kathi Seifert J.P. Morgan & Co. Incorporated (a global health & hygiene NOMINATING/CORPORATE (an investment banking firm) Jon Madonna product manufacturing company) GOVERNANCE COMMITTEE Retired Chairman of the Teresa Beck, Chair Board & Chief Executive Paul Corddry Officer of KPMG Peat Bonnie Hill Marwick (an international Jon Madonna accounting & consulting firm) Betty Rivera Kathi Seifert page 34 ALBERTSONS 2004 ANNUAL REPORT Making life easier for our customers

Other Information

Stock Price History

The company’s stock is traded on the New York Stock Exchange and Pacific Stock Exchange under the symbol ABS. The high and low stock prices by quarter were as follows:

First Second Third Fourth Year High Low High Low High Low High Low High Low

2004 $25.33 $21.57 $27.75 $22.43 $25.80 $22.30 $25.93 $22.35 $27.75 $21.57 2003 $21.71 $17.76 $21.91 $17.91 $23.65 $18.40 $24.19 $19.50 $24.19 $17.76 2002 $35.49 $26.88 $35.49 $26.51 $28.66 $22.14 $24.60 $18.85 $35.49 $18.85

Dividend History

In March 2005, the Board of Directors declared a regular quarterly cash dividend of $0.19 per share. The dividend will be paid on May 10, 2005, to shareholders of record on April 13, 2005.

First Second Third Fourth Year

2004 $0.19 $0.19 $0.19 $0.19 $0.76 2003 $0.19 $0.19 $0.19 $0.19 $0.76 2002 $0.19 $0.19 $0.19 $0.19 $0.76

Top 10 Shareholders as of February 4, 2005

Shares Held Percent of Holder (millions) Outstanding Capital Research & Management Company 36.8 10.0% Legg Mason Capital Management, Inc. 35.4 9.6% Brandes Investment Partners, LLC 35.3 9.6% Markus Stiftung 29.2 7.9% NWQ Investment Management Company, LLC 18.8 5.1% J.A. and Kathryn Albertson Foundation, Inc. 14.7 4.0% Hotchkis and Wiley Capital Management, LLC 14.2 3.9% UBS Global Asset Management (Americas), Inc. 13.3 3.6% Barclays Global Investors, N.A. 12.2 3.3% State Street Global Advisors (U.S.) 9.6 2.6% Outstanding Shares 368.3

Top Institutional Shareholder information provided by Thomson Financial Corporate Group. Markus Stiftung and J.A. and Kathryn Albertson Foundation, Inc. information provided by American Stock Transfer & Trust Company. Shareholder Information

Address Information Contact Albertson’s, Inc. Information on individual accounts or on procedures Store Support Center necessary to make changes in an account is provided 250 Parkcenter Boulevard by American Stock Transfer & Trust Company at P.O. Box 20 (888) 788-5081 Monday-Thursday between the Boise, Idaho 83726 hours of 8:00 a.m. and 7:00 p.m., Eastern Time, and Telephone: (208) 395-6200 Friday from 8:00 a.m. to 5:00 p.m., Eastern Time, after a shareholder identifies his or her account Internet Address by providing a taxpayer identification number, the Major press releases and other corporate registration name on the securities and the address data are available on Albertsons’ website: of record. When directing correspondence to www.albertsons.com American Stock Transfer & Trust Company at the address shown, shareholders are reminded to include Auditors a reference to Albertsons. Deloitte & Touche LLP Boise, Idaho Company Profile Available A copy of the Company Profile, which contains Stock Transfer Agent and Registrar a discussion of our core values, including equal American Stock Transfer & Trust Company opportunity, environmental quality and community 59 Maiden Lane support, as well as statistical information about New York, New York 10038 the company, is available to shareholders on the Telephone: (888) 788-5081 company’s website. www.amstock.com Corporate Governance Guidelines Shareholders of Record A copy of the company’s Corporate Governance There were 26,383 shareholders of record G u idelines is ava il a ble to shareholders on the at March 18, 2005. company’s website, or without charge upon request Annual Meeting to the Corporate Secretary of Albertsons. The 2005 Annual Meeting of Shareholders Annual Certifications will be held on Thursday, June 2, 2005. On July 6, 2004, our Chief Executive Officer submitted Dividend Reinvestment Plan his annual certification to the New York Stock The company’s Dividend Reinvestment Plan allows Exchange regarding Albertsons compliance with the s h a r e h o lder s of record to inv e s t their quart erly NYSE’s Corporate Governance listing standards. In dividends automatically and to purchase additional addition, our Chief Executive Officer and Chief shares under the Plan with voluntary cash payments. Financial Officer submitted the certification required More information may be obtained from American under Section 302 of the Sarbanes-Oxley Act as an Stock Transfer & Trust Company at (877) 842-1551, exhibit to Albertsons Form 10-K for the year ended www.investpower.com or from the Corporate Secretary February 3, 2005. of Albertsons. Albertson’s, Inc. 250 Parkcenter Boulevard P.O. Box 20 Boise, Idaho 83726 www.albertsons.com