FORM 10-Q






                       SECURITIES AND EXCHANGE COMMISSION


                             Washington, D.C. 20549





                         -------------------------------


                                    FORM 10-Q



                   Quarterly Report Under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934


        For 26 Weeks Ended: July 29, 1999 Commission File Number: 1-6187



                                ALBERTSON'S, INC.
              -----------------------------------------------------
             (Exact name of Registrant as specified in its charter)


           Delaware                                82-0184434
-------------------------------        ------------------------------------
(State or other jurisdiction of        (I.R.S. Employer Identification No.)
 incorporation or organization)


250 Parkcenter Blvd., P.O. Box 20, Boise, Idaho                     83726
-----------------------------------------------                  ----------
                  (Address)                                      (Zip Code)


     Registrant's telephone number, including area code:  (208) 395-6200
                                                          --------------


     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes  X    No
                                             -----    -----

     Number of Registrant's $1.00 par value
     common shares outstanding at August 26, 1999:   423,549,592

                                     1
<PAGE>
<TABLE>
<CAPTION>


                                                         PART I. FINANCIAL INFORMATION

                                                               ALBERTSON'S, INC.
                                                             CONSOLIDATED EARNINGS
                                                      (in thousands except per share data)
                                                                  (unaudited)

                                                            13 WEEKS ENDED                          26 WEEKS ENDED
                                                   ----------------------------------    --------------------------------------
                                                          July 29,         July 30,              July 29,           July 30,
                                                              1999             1998                  1999               1998
                                                   ---------------- -----------------    ------------------ -------------------
<S>                                                <C>              <C>                  <C>                <C>
Sales                                                   $9,381,341       $8,945,068           $18,596,628        $17,666,007
Cost of sales                                            6,825,931        6,550,025            13,538,614         12,973,227
                                                   ---------------- -----------------    ------------------ -------------------
Gross profit                                             2,555,410        2,395,043             5,058,014          4,692,780

Selling, general and
  administrative expenses                                2,172,341        1,952,051             4,230,489          3,854,659
Merger related and exit    costs                           457,768                                428,904
Impairment - store closures                                                                                           29,423
                                                   ---------------- -----------------    ------------------ -------------------
Operating (loss) profit                                    (74,699)         442,992               398,621            808,698

Other (expenses) income:
  Interest, net                                            (77,829)         (85,708)             (159,860)          (168,380)
  Other, net                                                   513            2,576                 4,813             11,851
                                                   ---------------- -----------------    ------------------ -------------------
(Loss) earnings before
 income taxes and extra-
 ordinary item                                            (152,015)         359,860               243,574            652,169
Income taxes                                                52,828          143,282               209,926            259,129
                                                   ---------------- -----------------    ------------------ -------------------
(Loss) earnings before
  extraordinary item                                      (204,843)         216,578                33,648            393,040
Extraordinary loss on
  extinguishment of debt, net
  of tax benefit of $7,388                                 (23,272)                               (23,272)
                                                   ---------------- -----------------    ------------------ -------------------

NET (LOSS) EARNINGS                                     $ (228,115)      $  216,578           $    10,376        $   393,040
                                                   ================ =================    ================== ===================

BASIC (LOSS) EARNINGS PER SHARE:
  (Loss) earnings before                                  $(0.49)           $0.52
     extraordinary item                                                                          $ 0.08               $0.94
  Extraordinary item                                       (0.06)                                 (0.06)
                                                   ---------------- -----------------    ------------------ -------------------
  Net (loss) earnings                                     $(0.54)           $0.52                $ 0.02               $0.94
                                                   ================ =================    ================== ===================

DILUTED (LOSS)EARNINGS PER SHARE:
  (Loss) earnings before                                  $(0.49)           $0.52
     extraordinary item                                                                          $ 0.08               $0.93
  Extraordinary item                                       (0.06)                                 (0.06)
                                                   ---------------- -----------------    ------------------ -------------------
  Net (loss) earnings                                     $(0.54)           $0.52                $ 0.02               $0.93
                                                   ================ =================    ================== ===================

WEIGHTED AVERAGE NUMBER OF
  COMMON SHARES OUTSTANDING:
     Basic                                                 421,619          418,518               420,953            418,455
     Diluted                                               421,619          420,488               422,317            420,522


</TABLE>

See Notes to Consolidated Financial Statements.

                                       2
<PAGE>
<TABLE>
<CAPTION>


                                                               ALBERTSON'S, INC.
                                                          CONSOLIDATED BALANCE SHEETS
                                                            (dollars in thousands)

                                                                                    July 29, 1999               January 28,
                                                                                      (unaudited)                      1999
                                                                              --------------------       -------------------
                   ASSETS
<S>                                                                           <C>                        <C>
CURRENT ASSETS:
   Cash and cash equivalents                                                            $ 35,848                 $ 116,139
   Accounts and notes receivable                                                         530,021                   581,625
   Inventories                                                                         3,113,215                 3,249,179
   Prepaid expenses                                                                      113,622                   106,800
   Refundable income taxes                                                               101,364
   Assets held for sale                                                                  570,461
   Deferred income taxes                                                                  86,897                   132,565
                                                                              --------------------       -------------------
                TOTAL CURRENT ASSETS                                                   4,551,428                 4,186,308

OTHER ASSETS                                                                             574,062                   663,301

GOODWILL (net of accumulated amortization of
   $573,854 and $581,851, respectively)                                                1,611,002                 1,737,936

LAND, BUILDINGS AND EQUIPMENT (net of
   accumulated depreciation and amortization
   of $4,655,868 and $4,774,030, respectively)                                         8,385,943                 8,543,722
                                                                              --------------------       -------------------

                                                                                     $15,122,435               $15,131,267
                                                                              ====================       ===================

     LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable                                                                  $ 2,158,492               $ 2,186,505
   Salaries and related liabilities                                                      471,421                   512,165
   Taxes other than income taxes                                                         184,779                   168,920
   Income taxes                                                                                                     62,534
   Self-insurance                                                                        142,023                   172,709
   Unearned income                                                                        88,299                   101,251
   Other current liabilities                                                             256,189                    91,713
   Merger related accruals                                                                58,628
   Current maturities of long-term debt                                                  340,121                    49,871
   Current capitalized lease obligations                                                  19,483                    18,118
                                                                              --------------------       -------------------
                TOTAL CURRENT LIABILITIES                                              3,719,435                 3,363,786

LONG-TERM DEBT                                                                         4,838,264                 4,905,392
CAPITALIZED LEASE OBLIGATIONS                                                            200,989                   202,171
SELF-INSURANCE                                                                           375,677                   315,180
DEFERRED INCOME TAXES                                                                     79,609                   207,833
OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS                                         448,782                   615,255
STOCKHOLDERS' EQUITY:
   Preferred stock - $1.00 par value;  authorized - 10,000,000 shares;  issued -
     none
   Common stock - $1.00 par value;  authorized - 1,200,000,000  shares; issued -
     423,466,327
     shares and 434,557,800 shares, respectively                                         423,466                   434,557
   Capital in excess of par value                                                        144,487                   579,403
   Treasury stock - 0 and 14,554,669 shares,
     respectively                                                                                                (519,051)
   Retained earnings                                                                   4,891,726                 5,026,741
                                                                              --------------------       -------------------
                                                                                       5,459,679                 5,521,650
                                                                              --------------------       -------------------
                                                                                     $15,122,435               $15,131,267
                                                                              ====================       ===================

</TABLE>

See Notes to Consolidated Financial Statements.

                                       3
<PAGE>
<TABLE>
<CAPTION>


                                                               ALBERTSON'S, INC.
                                                            CONSOLIDATED CASH FLOWS
                                                                (in thousands)
                                                                  (unaudited)

                                                                                              26 WEEKS ENDED
                                                                              -----------------------------------------------
                                                                                        July 29,                   July 30,
                                                                                            1999                       1998
                                                                              --------------------       --------------------
<S>                                                                           <C>                        <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net earnings                                                                       $   10,376                 $  393,040
     Adjustments to reconcile net earnings to
     net cash provided by operating activities:
       Depreciation and amortization                                                     418,383                    396,058
       Goodwill amortization                                                              29,687                     28,109
       Merger related noncash charges                                                    303,545
       Impairment - store closures                                                                                   29,423
       Net gain on asset sales                                                            (1,726)                    (1,741)
       Net deferred income taxes                                                         (82,556)                   (13,359)
       Increase in cash surrender value of
         Company-owned life insurance                                                     (4,813)                   (11,282)
       Changes in operating assets and
       liabilities:
         Receivables and prepaid expenses                                                154,043                      2,856
         Inventories                                                                       5,964                    194,601
         Accounts payable                                                                (28,013)                  (164,283)
         Other current liabilities                                                         5,278                    (44,659)
         Self-insurance                                                                   29,811                    (55,388)
         Unearned income                                                                  (9,520)                    (3,031)
         Other long-term liabilities                                                    (168,022)                    15,467
                                                                              --------------------       --------------------
   Net cash provided by operating activities                                             662,437                    765,811

CASH FLOWS FROM INVESTING ACTIVITIES:
   Net capital expenditures excluding
     noncash activities                                                                 (837,445)                  (671,123)
   Business acquisitions, net of cash acquired                                                                     (121,348)
   Increase in other assets                                                              (18,746)                   (72,297)
                                                                              --------------------       --------------------
   Net cash used in investing activities                                                (856,191)                  (864,768)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from long-term borrowings                                                  1,800,000                    462,000
   Payments on long-term borrowings                                                     (838,495)                  (176,767)
   Net commercial paper and bank line activity                                          (755,874)                  (130,128)
   Proceeds from stock options exercised                                                  20,110                     19,749
   Cash dividends                                                                       (112,278)                  (130,414)
   Stock purchased and retired                                                                                      (16,518)
                                                                              --------------------       --------------------
   Net cash provided by financing activities                                             113,463                     27,922
                                                                              --------------------       --------------------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                                (80,291)                   (71,035)

CASH AND CASH EQUIVALENTS AT BEGINNING
   OF PERIOD                                                                             116,139                    155,877
                                                                              --------------------       --------------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                            $   35,848                 $   84,842
                                                                              ====================       ====================

</TABLE>

See Notes to Consolidated Financial Statements.

                                       4

<PAGE>


                                ALBERTSON'S, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

Business Combination
On August  2,  1998,  Albertson's  Inc.  ("Albertson's"  or the  "Company")  and
American  Stores  Company  ("ASC")  entered into a definitive  merger  agreement
("Merger  Agreement")  whereby  Albertson's would acquire ASC by exchanging 0.63
share of  Albertson's  common  stock for each  outstanding  share of ASC  common
stock,  with cash being paid in lieu of fractional shares (the "Merger") and ASC
would be merged into a  wholly-owned  subsidiary  of  Albertson's.  In addition,
outstanding  rights to receive  ASC common  stock under ASC stock  option  plans
would be converted into rights to receive equivalent Albertson's common stock.

The Merger was consummated on June 23, 1999, with the issuance of  approximately
177  million  shares of  Albertson's  common  stock.  The Merger  constituted  a
tax-free reorganization and has been accounted for as a pooling of interests for
accounting and financial reporting purposes.  The pooling of interests method of
accounting  is  intended  to present as a single  interest,  two or more  common
stockholders'  interests that were previously  independent;  accordingly,  these
consolidated financial statements restate the historical financial statements as
though the companies had always been combined. The restated financial statements
are  adjusted  to  conform  the  accounting  policies  and  financial  statement
presentations.

Basis of Presentation
In the opinion of management,  the accompanying unaudited consolidated financial
statements include all adjustments  necessary to present fairly, in all material
respects,  the results of operations  of the Company for the periods  presented.
Such adjustments  consisted only of normal recurring items except for the merger
related  charges  discussed  under "Merger  Related and Exit Costs" and the 1998
impairment charge discussed under "Impairment - Store Closures".  The statements
have been prepared by the Company  pursuant to the rules and  regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial  statements prepared in accordance with generally
accepted  accounting  principles have been condensed or omitted pursuant to such
rules  and  regulations.  It is  suggested  that  these  consolidated  financial
statements be read in conjunction with the supplemental  consolidated  financial
statements  for each of the three years in the period ended January 28, 1999, as
included  in the  Company's  Form 8-K filed  with the  Securities  and  Exchange
Commission on July 16, 1999 ("July 1999 8-K").  The balance sheet at January 28,
1999, has been taken from the audited  supplemental  consolidated  balance sheet
included in the Company's July 1999 8-K.

The  preparation  of  the  Company's  consolidated   financial  statements,   in
conformity with generally accepted accounting principles, requires management to
make  estimates and  assumptions.  These  estimates and  assumptions  affect the
reported  amounts of assets and  liabilities  and the  disclosure  of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses  during the reporting  period.  Actual  results
could differ from these estimates.

Historical operating results are not necessarily indicative of future results.

Reclassifications and Conformity Adjustments
Certain  reclassifications  and adjustments  have been made to the  consolidated
supplemental financial statements for conformity purposes.

Reporting Periods
The  Company's   quarterly   reporting   periods  are  generally  13  weeks  and
periodically  consist of 14 weeks  because the fiscal year ends on the  Thursday
nearest to January  31 each year (the  Saturday  nearest to January 31 for ASC).

                                       5
<PAGE>

The consolidated  financial information includes the results of operations for a
full 13 week and 26 week period with  Albertson's  period  ending July 29, 1999,
and ASC's period ending July 31, 1999.

Merger Related and Exit Costs
Results of operations for the 13 weeks ended July 29, 1999, include $576 million
of merger related and exit costs ($464 million after tax).  The following  table
presents  the pre-tax  costs  incurred by  category  of  expenditure  and merger
related  accruals  included  in the  Company's  consolidated  balance  sheet (in
millions):
<TABLE>
<CAPTION>

                                               Exit       Merger          Extraordinary       Period
                                              Costs       Charge                   Loss        Costs        Total
                                       ------------- ------------ ---------------------- ------------ ------------
<S>                                    <C>           <C>          <C>                    <C>          <C>

Severance costs                              $   93        $   8                               $   2       $  103
Write-down of assets
  to net realizable
  value and other                               272                                                1          273
Transaction and
  financing costs                                                                $   31           73          104
Integration costs                                              9                                  11           20
Stock option charge                                           76                                               76
                                       ------------- ------------ ---------------------- ------------ ------------
  Total costs                                   365           93                     31           87          576
Cash expenditures                               (72)          (7)                   (22)         (84)        (185)
Write-down of assets
  to net realizable
  value                                        (256)                                                         (256)
Stock option charge                                          (76)                                             (76)
                                       ============= ============ ====================== ============ ============
Merger related accruals
  at July 29, 1999                           $   37        $  10                 $    9        $   3       $   59
                                       ============= ============ ====================== ============ ============

</TABLE>

Employee  severance costs consist of severance for employees who were terminated
or were notified of termination.  Approximately 600 employees will be severed as
a result of the Merger of which 181 were terminated as of July 29, 1999.

The write-down of assets to net  realizable  value includes the expected loss on
disposal of stores required to be divested  (discussed  below) and duplicate and
abandoned  facilities,   including   administrative  offices,   intangibles  and
information  technology  equipment  which were  abandoned  by the Company or are
being held for sale.  The  estimated  fair  values of assets  held for sale were
determined using negotiated sales prices or independent appraisals.

Transaction and financing costs consist  primarily of professional fees paid for
investment  banking,  legal,  accounting,  printing and regulatory  filing fees.
Financing costs also include the  extraordinary  loss on  extinguishment of debt
discussed under "Indebtedness" below.

Integration  costs consist  primarily of incremental  transition and integration
costs associated with integrating the operations of Albertson's and ASC and were
expensed as incurred.

As a result of the Merger,  stock options and certain shares of restricted stock
granted  under  Albertson's  and  ASC's  stock  option  and  stock  award  plans
automatically  vested  upon the change of control as defined  separately  in the
plans.  In addition  to the  conversion  of ASC  options  into rights to acquire
shares of Company  common stock,  option  holders had the right  (limited  stock
appreciation  right or LSAR),  during an exercise  period of up to 60 days after
the occurrence of a change of control (but prior to consummation of the Merger),
to elect to  surrender  all or part of their  options in exchange  for shares of
Albertson's  common  stock  having a value  equal to the excess of the change of
control price over the exercise  price (which shares were  deliverable  upon the
Merger).

                                       6
<PAGE>

Approval of the Merger  Agreement on November 12,  1998,  by ASC's  stockholders
accelerated  the vesting of 6.4 million  equivalent  stock options granted under
Pre-1997 ASC Plans  (approximately  60% of ASC's  outstanding stock options) and
permitted the holders of these options to exercise LSARs. The  exercisability of
6.4 million LSARs  resulted in ASC  recognizing a $195.3  million merger related
stock option charge  (pre-tax)  during the fourth fiscal  quarter of 1998.  This
charge was  recorded  based on the  difference  between the  average  equivalent
option exercise price of $30.40 and the average market price at measurement date
of $60.78.  Of the 6.4 million  equivalent  options,  3.9 million were exercised
using the LSAR feature,  1.1 million were exercised  without using the LSAR, and
at expiration of the LSAR on January 10, 1999,  1.4 million  equivalent  options
reverted back to fixed price options at an average equivalent  exercise price of
$32.00.

In the first  quarter of 1999 a market  price  adjustment  of $28.9  million was
recorded as a reduction of merger related and exit costs to reflect a decline in
the relevant stock price at the end of the first fiscal quarter  relative to the
3.9 million  exercised LSARs. The actual change of control price used to measure
the value of these  exercised  LSARs became  determinable at the date the Merger
was   consummated   and  resulted  in  no  further   adjustments.   Upon  Merger
consummation, the change of control price was $53.77 per share, resulting in the
issuance of approximately 1.7 million Company shares.

LSARs  relating to  approximately  4.0 million  equivalent  stock options became
exercisable  upon  regulatory   approval  of  the  Merger,   which  resulted  in
recognition  of an  additional  noncash  charge of $76.5  million  in the second
quarter of fiscal  1999,  which is  included  with the merger  related  and exit
costs. This charge was based upon an average equivalent exercise price of $37.65
and a change of control price of $56.96 which includes an adjustment  factor for
the early termination of the LSAR feature. A total of 0.8 million Company shares
were issued in  satisfaction  of those  options  for which the LSAR  feature was
elected  and the  remaining  options  were  converted  into  options  to acquire
approximately 1.2 million Company shares at an average exercise price of $37.65.

In connection  with the Merger,  the Company  entered into  agreements  with the
Attorneys  General of  California,  Nevada and New Mexico and the Federal  Trade
Commission  to  enable  the  Merger  to  proceed  under  applicable   antitrust,
competition  and trade  regulation  law. The  agreements  require the Company to
divest a total of 117 stores in California,  19 stores in Nevada and 9 stores in
New Mexico. Of the stores required to be divested, 40 are ASC locations operated
primarily  under  the  Lucky  name,  and 105  are  Albertson's  stores  operated
primarily under the Albertson's name. In addition,  the Company will divest four
supermarket  real  estate  sites  as  required  by the  agreements.  The  stores
identified for disposition had sales of $2.3 billion in fiscal 1998. The Company
expects the divestitures to be  substantially  completed by the end of the third
quarter of 1999.

Impairment - Store Closures
The Company  recorded a charge to earnings in the first  quarter of 1998 related
to management's  decision to close 16  underperforming  stores in 8 states.  The
charge included impaired real estate and equipment, as well as the present value
of remaining  liabilities  under leases,  net of expected  sublease  recoveries.
Substantially  all of these stores have been closed and management  believes the
1998 charge and remaining reserves are adequate.

Income Taxes
The  effective  income tax rate for 1999  increased as a result of the effect of
certain merger related and exit costs for which there were not corresponding tax
benefits.
                                       7
<PAGE>

Earnings Per Share
As a result of the second quarter net loss,  1,319,262 shares were anti-dilutive
and,  accordingly,   were  not  included  in  the  diluted  earnings  per  share
calculation for the 13 weeks ended July 29, 1999.

Indebtedness
On March 30, 1999, the Company entered into a revolving  credit agreement with a
syndicate of commercial banks whereby the Company may borrow  principal  amounts
up to $1.5  billion  at  varying  interest  rates at any time prior to March 28,
2000.  The  agreement has a one-year term out option which allows the Company to
convert any loans  outstanding  on the  expiration  date of the  agreement  into
one-year  term  loans.  The  agreement  contains  certain  covenants,  the  most
restrictive of which requires the Company to maintain  consolidated tangible net
worth,  as defined,  of at least $2.1 billion.  In addition to the new revolving
credit  agreement,  the Company has an existing  $600 million  revolving  credit
agreement,  whereby the Company may borrow principal amounts at varying interest
rates any time prior to December 17, 2001. The  combination of the two revolving
credit  agreements  allows the  Company to borrow  principal  amounts up to $2.1
billion  and  serves as backup  financing  for the  Company's  commercial  paper
borrowings.  There were no amounts  outstanding  under either  revolving  credit
agreement as of July 29, 1999.

Following  the Merger the Company  has  consolidated  several of the  commercial
paper,  bank lines and other financing  arrangements.  The consolidation of debt
included the  repayment of  outstanding  amounts  under ASC's  revolving  credit
facilities and other debt containing change of control provisions and the tender
for, or open market purchases of, certain  higher coupon debt. As a result,  the
following debt was extinguished (in millions):

<TABLE>
<CAPTION>
                                                                                                         Amount
Debt Description                                    Reason for Repayment                           Extinguished
--------------------------------------------------- --------------------------------- --------------------------
<S>                                                 <C>                               <C>
Revolving Credit Facility                           Change of control                                   $ 500.0
Bank borrowing due 2000                             Change of control                                      75.0
10.6% Note due in 2004                              Change of control                                      93.4
9.125% Notes due 2002                               Tender offer                                          170.1
8.0% Debentures due 2026                            Open market purchases                                  78.3
7.9% Debentures due 2017                            Open market purchases                                   4.5

</TABLE>

In July 1999 the Company  issued $500 million of floating rate notes.  The notes
are due July 2000 and bear interest based on LIBOR  commercial  paper rates that
reset  monthly.  As of July  29,  1999,  the  interest  rate  was  5.16%  on the
outstanding notes. These notes were issued under the Company's  commercial paper
program.

In July  1999 the  Company  issued  $1.3  billion  of term  notes  under a shelf
registration  statement  filed with the  Securities  and Exchange  Commission in
February  1999.  The notes are comprised  of: $300 million of principal  bearing
interest at 6.55% due August 1, 2004; $350 million of principal bearing interest
at 6.95% due August 1, 2009; and $650 million of principal  bearing  interest at
7.45% due August 1, 2029.  Interest  is paid  semiannually.  Proceeds  were used
primarily to repay  borrowings  under the Company's  commercial  paper  program.
Additional securities up to $1.2 billion remain available for issuance under the
Company's 1999 registration statement.

On May 14, 1999,  ASC terminated its $300 million LIBOR basket swap at a cost of
$0.8  million.  The five-year  swap  agreement had been entered into in 1997 and
diversified  the indices used to determine the interest rate on a portion of the
Company's  variable rate debt by providing  for payments  based on foreign LIBOR
indices  which were reset every three  months.  The fair value of the  agreement
based on market quotes at fiscal year-end 1998 was a loss of $5.3 million.

                                       8
<PAGE>

In July 1999 the Company  negotiated  an  amendment  to a $200 million term loan
agreement  between ASC and a group of commercial  banks. The original  agreement
contained  a change of control  provision.  The  amended  agreement  has revised
representations,   warranties  and  covenants  which  substantially  mirror  the
Company's  $1.5  billion  revolving  credit  agreement as well as a guarantee by
Albertson's,  Inc.  The  amended  fixed rate loans carry  interest  based upon a
pricing  schedule (which averages 6.75%)  dependent upon the Company's long-term
debt rating, and mature July 3, 2004.

Supplemental Cash Flow Information
Selected cash payments and noncash activities were as follows (in thousands):

<TABLE>
<CAPTION>

                                                                          26 Weeks Ended                26 Weeks Ended
                                                                           July 29, 1999                 July 30, 1998
                                                                  -----------------------       -----------------------
<S>                                                               <C>                           <C>
Cash payments for:
   Income taxes                                                                $ 373,676                     $ 288,475
   Interest, net of amounts
     capitalized                                                                 169,585                       155,821
Noncash activities:
   Capitalized leases incurred                                                    11,344                         8,049
   Capitalized leases terminated                                                     646                         5,509
   Tax benefits related to stock
     options                                                                       5,438                         1,450
   Liabilities assumed in connection
     with asset acquisition                                                        6,976                            90
   Increase in cash surrender value
     of Company-owned life insurance                                               4,813                        11,282
   Fair market value of stock
     exchanged for option price and
     tax withholdings                                                              1,091
   Noncash merger charges:
     Write-down of assets to net realizable
      value                                                                      255,948
     Stock option charge                                                          47,597
   Impairment loss - store closures                                                                             29,423
   Note payable related to
     business acquisition                                                                                        8,000

</TABLE>

Recent Accounting Standards
In June 1998 the  Financial  Accounting  Standards  Board  issued  Statement  of
Financial Accounting  Standards No. 133, "Accounting for Derivative  Instruments
and Hedging Activities." This new standard establishes  accounting and reporting
standards for derivative  instruments,  including certain derivative instruments
embedded in other  contracts,  and for hedging  activities.  It requires that an
entity  recognize  all  derivatives  as  either  assets  or  liabilities  in the
statement of financial  position and measure  those  instruments  at fair value.
This standard is effective for the Company's  2001 fiscal year.  The Company has
not yet completed its evaluation of this standard or its impact,  if any, on the
Company's reporting requirements.



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Business Combination
On August  2,  1998,  Albertson's  Inc.  ("Albertson's"  or the  "Company")  and
American  Stores  Company  ("ASC")  entered into a definitive  merger  agreement
("Merger  Agreement")  whereby  Albertson's would acquire ASC by exchanging 0.63
share of  Albertson's  common  stock for each  outstanding  share of ASC  common
stock,  with cash being paid in lieu of fractional shares (the "Merger") and ASC
would be merged into a wholly-owned subsidiary of Albertson's.

                                       9
<PAGE>

The Merger was consummated on June 23, 1999, with the issuance of  approximately
177  million  shares of  Albertson's  common  stock.  The Merger  constituted  a
tax-free reorganization and has been accounted for as a pooling of interests for
accounting and financial reporting purposes.  The pooling of interests method of
accounting  is  intended  to present as a single  interest,  two or more  common
stockholders'  interests that were previously  independent;  accordingly,  these
consolidated financial statements restate the historical financial statements as
though the companies had always been combined. The restated financial statements
are  adjusted  to  conform  the  accounting  policies  and  financial  statement
presentations.

Results of Operations - Second Quarter
Sales for the 13 weeks ended July 29, 1999, increased 4.9% primarily as a result
of the continued  expansion of net retail square footage.  Identical store sales
increased 1.1% and comparable  store sales (which  include  replacement  stores)
increased  1.5%.  Management  estimates that there was deflation in the price of
products the Company sells of approximately 0.6% (annualized). During the second
quarter the Company opened 21 combination  food and drug stores,  14 drug stores
and 7 fuel centers.  The Company closed 16 conventional and combination food and
drug stores, 3 of which were required  divestitures and 6 of which were replaced
with newer  stores.  The  Company  also closed 12 drug  stores,  5 of which were
replaced  with newer stores.  Sixteen  stores were  remodeled  during the second
quarter.  Construction  of a new  distribution  center  in Tulsa,  Oklahoma  was
completed  August 1, 1999, and shipments to the Company's  stores in the Midwest
began on August 16, 1999. Retail square footage increased to 98.9 million square
feet, a net increase of 6.0% from July 30, 1998.

In addition to store  development,  the Company plans to increase  sales through
its  investment  in programs  initiated  in recent  years which are  designed to
provide  solutions  to  customer  needs.  These  programs  include the Front End
Manager program; the home meal solutions process called "Quick Fixin' Ideas(R)";
special destination categories;  pharmacy and health initiatives;  and increased
emphasis on training  programs  utilizing  Computer Guided Training.  To provide
additional   solutions   to   customer   needs,   the   Company  has  added  new
gourmet-quality  bakery  products and organic  grocery and produce items.  Other
solutions include neighborhood marketing,  targeted advertising and exciting new
and  remodeled   stores.   Future  growth  will  be  affected  by  the  required
divestitures  of 145 stores in connection  with the Merger.  The Company expects
the divestitures to be  substantially  completed by the end of the third quarter
of 1999.

For the 13 weeks ended July 29,  1999,  the Company  reported a net loss of $228
million,  or $0.54 per basic and diluted share as compared to net income of $217
million  or $0.52 per basic and  diluted  share for the 13 weeks  ended July 30,
1998.  The net loss for 1999 is  attributable  to merger  related and exit costs
associated with the Merger as discussed below.

Results of operations for the 13 weeks ended July 29, 1999, include $576 million
of merger related and exit costs ($464 million after tax).  The following  table
presents the pre-tax costs incurred by category of expenditure (in millions):

<TABLE>
<CAPTION>
                                             Exit       Merger          Extraordinary       Period
                                            Costs       Charge                   Loss        Costs        Total
                                      ------------ ------------ ---------------------- ------------ ------------
<S>                                   <C>          <C>          <C>                    <C>          <C>

Severance costs                               $93           $8                                  $2        $ 103
Write-down of assets
  to net realizable
  value and other                             272                                                1          273
Transaction and
  financing costs                                                                 $31           73          104
Integration costs                                            9                                  11           20
Stock option charge                                         76                                               76
                                      ============ ============ ====================== ============ ============
  Total costs                               $ 365         $ 93                    $31         $ 87        $ 576
                                      ============ ============ ====================== ============ ============

</TABLE>
                                       10
<PAGE>

Employee  severance costs consist of severance for employees who were terminated
or were notified of termination.  Approximately 600 employees will be severed as
a result of the Merger of which 181 were terminated as of July 29, 1999.

The write-down of assets to net  realizable  value includes the expected loss on
disposal of stores required to be divested (discussed under  "Divestitures") and
duplicate   and  abandoned   facilities,   including   administrative   offices,
intangibles  and  information  technology  equipment which were abandoned by the
Company or are being held for sale. The estimated fair values of assets held for
sale were determined using negotiated sales prices or independent appraisals.

Transaction and financing costs consist  primarily of professional fees paid for
investment  banking,  legal,  accounting,  printing and regulatory  filing fees.
Financing costs also include the extraordinary loss on extinguishment of debt.

Integration  costs consist  primarily of incremental  transition and integration
costs associated with integrating the operations of Albertson's and ASC and were
expensed as incurred.

As a result  of the  Merger,  stock  option  compensation  cost  was  recognized
pursuant  to the limited  stock  appreciation  rights  discussed  under  "Merger
Related and Exit Costs" in the Notes to Consolidated Financial Statements.

The Company expects to incur additional  after-tax merger related and exit costs
of approximately $236 million over the next two years which consist primarily of
expected  integration  costs  and  costs  associated  with  other  consolidation
activities for which plans have not yet been finalized.

Due to the  significance  of the merger related and exit costs and the effect on
operating results,  the following table and discussion that follows is presented
to aid in the comparison of income statement  components  without the effects of
merger related and exit costs (in thousands).

<TABLE>
<CAPTION>

                                                  13 Weeks Ended July 29, 1999                          13 Weeks Ended
                                                                                                        July 30, 1998
                                   ------------------------------------------------------------
                                     As Reported     Adjustments       Adjusted
                                   ---------------- --------------- ---------------- ----------    -------------------------
<S>                                <C>              <C>             <C>              <C>           <C>              <C>

Sales                                $9,381,341                        $9,381,341      100.00%       $8,945,068     100.00%
Cost of sales                         6,825,931         $  (3,794)      6,822,137       72.72         6,550,025      73.22
                                   ---------------- --------------- ---------------- ----------    -------------- ----------
Gross profit                          2,555,410             3,794       2,559,204       27.28         2,395,043      26.78
Selling, general and
  administrative expenses             2,172,341           (82,851)      2,089,490       22.27         1,952,051      21.82
Merger related and exit
  costs                                 457,768          (457,768)
                                   ---------------- --------------- ---------------- ----------    -------------- ----------

Operating (loss) profit                 (74,699)          544,413         469,714        5.01           442,992       4.95
Interest expense, net                   (77,829)              850         (76,979)      (0.82)          (85,708)     (0.96)
Other income, net                           513                               513        0.01             2,576       0.03
                                   ---------------- --------------- ---------------- ----------    -------------- ----------

(Loss) earnings before
  income taxes and
  extraordinary item                   (152,015)          545,263         393,248        4.19           359,860       4.02
Income taxes                             52,828           104,471         157,299        1.68           143,282       1.60
                                   ---------------- --------------- ---------------- ----------    -------------- ----------

(Loss) earnings before
  extraordinary item                   (204,843)          440,792         235,949        2.52           216,578       2.42

Extraordinary loss on
  extinguishment of debt,
  net  of tax benefit of
  $7,388                                (23,272)           23,272
                                   ---------------- --------------- ---------------- ----------    -------------- ----------

NET (LOSS) EARNINGS                  $ (228,115)        $ 464,064      $  235,949        2.52%       $  216,578       2.42%
                                   ================ =============== ================ ==========    ============== ==========
</TABLE>

                                       11
<PAGE>

Gross  profit,  as a  percent  to  sales,  increased  primarily  as a result  of
continued  improvements  made  in  retail  stores,   including  improvements  in
underperforming stores and improved sales mix of partially prepared, value-added
products.  Gross profit  improvements  were also realized  through the continued
utilization  of  Company-owned  distribution  facilities  and  increased  buying
efficiencies.  The pre-tax  LIFO charge  reduced  gross  profit by $9.0  million
(0.10% to sales) in the  second  quarter  of 1999 as  compared  to $8.2  million
(0.09% to sales) in the second quarter of 1998.

Selling,  general and administrative  expenses excluding merger related and exit
costs, as a percent to sales,  increased  primarily due to increased  salary and
related benefit costs resulting from the Company's initiatives to increase sales
and increased  depreciation  expense  associated  with the  Company's  expansion
program.

Results of Operations - Year-To-Date
Sales for the 26 weeks ended July 29, 1999, increased 5.3% primarily as a result
of the continued  expansion of net retail square footage.  Identical store sales
increased 1.3% and comparable  store sales (which  include  replacement  stores)
increased  1.7%.  Management  estimates that there was deflation in the price of
products the Company sells of  approximately  0.6%  (annualized).  During the 26
weeks ended July 29,  1999,  the  Company  opened 33  combination  food and drug
stores,  28 drug stores and 16 fuel centers.  The Company closed 26 conventional
and combination food and drug stores, 3 of which were required  divestitures and
8 of which were  replaced  with newer  stores.  The Company  also closed 13 drug
stores,  5 of which were replaced with newer  stores.  Twenty-eight  stores were
remodeled  during the 26 weeks.  Construction  of a new  distribution  center in
Tulsa,  Oklahoma was  completed  August 1, 1999,  and shipments to the Company's
stores in the Midwest began on August 16, 1999.  Retail square footage increased
to 98.9 million square feet, a net increase of 6.0% from July 30, 1998.

In addition to store  development,  the Company plans to increase  sales through
its  investment  in programs  initiated  in recent  years which are  designed to
provide  solutions  to  customer  needs.  These  programs  include the Front End
Manager program; the home meal solutions process called "Quick Fixin' Ideas(R)";
special destination categories;  pharmacy and health initiatives;  and increased
emphasis on training  programs  utilizing  Computer Guided Training.  To provide
additional   solutions   to   customer   needs,   the   Company  has  added  new
gourmet-quality  bakery  products and organic  grocery and produce items.  Other
solutions include neighborhood marketing,  targeted advertising and exciting new
and  remodeled   stores.   Future  growth  will  be  affected  by  the  required
divestitures  of 145 stores in connection  with the Merger.  The Company expects
the divestitures to be  substantially  completed by the end of the third quarter
of 1999.

For the 26 weeks ended July 29,  1999,  the Company  reported  net income of $10
million,  or $0.02 per basic and diluted  share as  compared to $393  million or
$0.94 per basic and $0.93  per  diluted  share for the 26 weeks  ended  July 30,
1998.  The decrease from the prior year is  attributable  to merger  related and
exit costs associated with the Merger as discussed below.

Results of operations for the 26 weeks ended July 29, 1999, include $551 million
of merger related and exit costs ($449 million after tax).  The following  table
presents the pre-tax costs incurred by category of expenditure (in millions):

                                       12
<PAGE>
<TABLE>
<CAPTION>

                                            Exit        Merger          Extraordinary       Period
                                           Costs        Charge                   Loss        Costs        Total
                                      ------------ ------------ ---------------------- ------------ ------------
<S>                                   <C>          <C>          <C>              <C>   <C>          <C>
Severance costs                               $93           $8                                  $2        $ 103
Write-down of assets
  to net realizable
  value and other                             272                                                1          273
Transaction and
  financing costs                                                                 $31           73          104
Integration costs                                            9                                  15           24
Stock option charge                                         47                                               47
                                      ------------ ------------ ---------------------- ------------ ------------
  Total costs                               $ 365         $ 64                    $31         $ 91        $ 551
                                      ============ ============ ====================== ============ ============
</TABLE>

Employee  severance costs consist of severance for employees who were terminated
or were notified of termination.  Approximately 600 employees will be severed as
a result of the Merger of which 181 were terminated as of July 29, 1999.

The write-down of assets to net  realizable  value includes the expected loss on
disposal of stores required to be divested (discussed under  "Divestitures") and
duplicate   and  abandoned   facilities,   including   administrative   offices,
intangibles  and  information  technology  equipment which were abandoned by the
Company or are being held for sale. The estimated fair values of assets held for
sale were determined using negotiated sales prices or independent appraisals.

Transaction and financing costs consist  primarily of professional fees paid for
investment  banking,  legal,  accounting,  printing and regulatory  filing fees.
Financing costs also include the extraordinary loss on extinguishment of debt.

Integration  costs consist  primarily of incremental  transition and integration
costs associated with integrating the operations of Albertson's and ASC and were
expensed as incurred.

As a result  of the  Merger,  stock  option  compensation  cost  was  recognized
pursuant  to the limited  stock  appreciation  rights  discussed  under  "Merger
Related and Exit Costs" in the Notes to Consolidated Financial Statements.

The Company expects to incur additional  after-tax merger related and exit costs
of approximately $236 million over the next two years which consist primarily of
expected  integration  costs  and  costs  associated  with  other  consolidation
activities for which plans have not yet been finalized.

Due to the  significance  of the merger related and exit costs and the effect on
operating results,  the following table and discussion that follows is presented
to aid in the comparison of income statement  components  without the effects of
merger related and exit costs (in thousands).

                                       13
<PAGE>
<TABLE>
<CAPTION>

                                                  26 Weeks Ended July 29, 1999                          26 Weeks Ended
                                                                                                        July 30, 1998
                                   ------------------------------------------------------------
                                     As Reported     Adjustments       Adjusted
                                   ---------------- --------------- ---------------- ----------    -------------------------
<S>                                <C>              <C>             <C>              <C>           <C>              <C>
Sales                               $18,596,628                       $18,596,628      100.00%      $17,666,007     100.00%
Cost of sales                        13,538,614         $  (3,794)     13,534,820       72.78        12,973,227      73.44
                                   ---------------- --------------- ---------------- ----------    -------------- ----------
Gross profit                          5,058,014             3,794       5,061,808       27.22         4,692,780      26.56
Selling, general and
  administrative expenses             4,230,489           (87,151)      4,143,338       22.28         3,854,659      21.82
Merger related and exit
  costs                                 428,904          (428,904)
Impairment - store
  closures                                                                                               29,423       0.17
                                   ---------------- --------------- ---------------- ----------    -------------- ----------

Operating profit                        398,621           519,849         918,470        4.94           808,698       4.58
Interest expense, net                  (159,860)              850        (159,010)      (0.86)         (168,380)     (0.95)
Other income, net                         4,813                             4,813        0.03            11,851       0.07
                                   ---------------- --------------- ---------------- ----------    -------------- ----------

Earnings before income                                                                                  652,169       3.69
  taxes and extraordinary
  item                                  243,574           520,699         764,273        4.11
Income taxes                            209,926            94,559         304,485        1.64           259,129       1.47
                                   ---------------- --------------- ---------------- ----------    -------------- ----------

Earnings before
  extraordinary item                     33,648           426,140         459,788        2.47           393,040       2.22

Extraordinary loss on
  extinguishment of debt,
  net  of tax benefit of
  $7,388                                (23,272)           23,272
                                   ---------------- --------------- ---------------- ----------    -------------- ----------

NET EARNINGS                        $    10,376         $ 449,412     $   459,788        2.47%      $   393,040       2.22%
                                   ================ =============== ================ ==========    ============== ==========
</TABLE>

Gross  profit,  as a  percent  to  sales,  increased  primarily  as a result  of
continued  improvements  made  in  retail  stores,   including  improvements  in
underperforming stores and improved sales mix of partially prepared, value-added
products.  Gross profit  improvements  were also realized  through the continued
utilization  of  Company-owned  distribution  facilities  and  increased  buying
efficiencies.  The pre-tax LIFO charge  reduced  gross  profit by $18.0  million
(0.10% to sales) in the 26 weeks  ended  July 29,  1999,  as  compared  to $21.2
million (0.12% to sales) for the 26 weeks ended July 30, 1998.

Selling,  general and administrative  expenses excluding merger related and exit
costs, as a percent to sales,  increased  primarily due to increased  salary and
related benefit costs resulting from the Company's initiatives to increase sales
and increased  depreciation  expense  associated  with the  Company's  expansion
program.

The Company recorded a $29.4 million pre-tax ($18.4 million after tax) charge to
earnings  (Impairment - Store  Closures) in the first quarter of 1998 related to
management's decision to close 16 underperforming  stores in 8 states during the
fiscal year. The charge includes impaired real estate and equipment,  as well as
the  present  value of  remaining  liabilities  under  leases,  net of  expected
sublease recoveries. Substantially all of these stores have been closed.

Other income for the 26 weeks ended July 29, 1999,  included  noncash  income of
$4.8  million for the increase in cash  surrender  value of  Company-owned  life
insurance as compared to income of $11.3 million for the 26 weeks ended July 30,
1998.

Liquidity and Capital Resources
The Company's  operating results continue to enhance its financial  position and
ability to continue its planned  expansion  program.  Cash flows from operations
and available  borrowings are sufficient for the future  operating  needs of the
Company.

Cash  provided by operating  activities  during the 26 weeks ended July 29, 1999
was $662  million as  compared to $766  million  during the same period of 1998.

                                       14
<PAGE>

During the 26 weeks ended July 29, 1999,  the Company  invested $837 million for
net capital expenditures. The Company's financing activities during the 26 weeks
ended July 29,  1999,  included  net new  borrowings  of $206  million  and $112
million for the payment of dividends.

The Company  utilizes its commercial  paper and bank line programs  primarily to
supplement cash requirements for seasonal fluctuations in working capital and to
fund its capital  expenditure  program.  Accordingly,  commercial paper and bank
line borrowings will fluctuate between quarterly  reporting  periods.  Following
the Merger the Company has consolidated  several of the commercial  paper,  bank
lines and other financing  arrangements.  The consolidation of debt included the
repayment of ASC debt  containing  change of control  provisions  and the tender
for, or open market purchases of, certain higher coupon debt.

On March 30, 1999, the Company entered into a revolving  credit agreement with a
syndicate of commercial banks whereby the Company may borrow  principal  amounts
up to $1.5  billion  at  varying  interest  rates at any time prior to March 28,
2000.  The  agreement has a one-year term out option which allows the Company to
convert any loans  outstanding  on the  expiration  date of the  agreement  into
one-year  term  loans.  The  agreement  contains  certain  covenants,  the  most
restrictive of which requires the Company to maintain  consolidated tangible net
worth,  as defined,  of at least $2.1 billion.  In addition to the new revolving
credit  agreement,  the Company has an existing  $600 million  revolving  credit
agreement,  whereby the Company may borrow principal amounts at varying interest
rates any time prior to December 17, 2001. The  combination of the two revolving
credit  agreements  allows the  Company to borrow  principal  amounts up to $2.1
billion  and  serves as backup  financing  for the  Company's  commercial  paper
borrowings.  There were no amounts  outstanding  under either  revolving  credit
agreement as of July 29, 1999.

In July 1999 the Company  issued $500 million of floating rate notes.  The notes
are due July 2000 and bear interest based on LIBOR  commercial  paper rates that
reset  monthly.  As of July  29,  1999,  the  interest  rate  was  5.16%  on the
outstanding notes. These notes were issued under the Company's  commercial paper
program.

In July  1999 the  Company  issued  $1.3  billion  of term  notes  under a shelf
registration  statement  filed with the  Securities  and Exchange  Commission in
February  1999.  The notes are comprised  of: $300 million of principal  bearing
interest at 6.55% due August 1, 2004; $350 million of principal bearing interest
at 6.95% due August 1, 2009; and $650 million of principal  bearing  interest at
7.45% due August 1, 2029.  Interest  is paid  semiannually.  Proceeds  were used
primarily to repay  borrowings  under the Company's  commercial  paper  program.
Additional securities up to $1.2 billion remain available for issuance under the
Company's 1999 registration statement.

Divestitures
In connection  with the Merger,  the Company  entered into  agreements  with the
Attorneys  General of  California,  Nevada and New Mexico and the Federal  Trade
Commission  to  enable  the  Merger  to  proceed  under  applicable   antitrust,
competition  and trade  regulation  law. The  agreements  require the Company to
divest a total of 117 stores in California,  19 stores in Nevada and 9 stores in
New Mexico. Of the stores required to be divested, 40 are ASC locations operated
primarily  under  the  Lucky  name,  and 105  are  Albertson's  stores  operated
primarily under the Albertson's name. In addition,  the Company will divest four
supermarket  real  estate  sites  as  required  by the  agreements.  The  stores
identified for disposition had sales of $2.3 billion in fiscal 1998. The Company
expects the divestitures to be  substantially  completed by the end of the third
quarter of 1999.

Recent Accounting Standards
In June 1998 the  Financial  Accounting  Standards  Board  issued  Statement  of
Financial Accounting  Standards No. 133, "Accounting for Derivative  Instruments

                                       15
<PAGE>

and Hedging Activities." This new standard establishes  accounting and reporting
standards for derivative  instruments,  including certain derivative instruments
embedded in other  contracts,  and for hedging  activities.  It requires that an
entity  recognize  all  derivatives  as  either  assets  or  liabilities  in the
statement of financial  position and measure  those  instruments  at fair value.
This standard is effective for the Company's  2001 fiscal year.  The Company has
not yet completed its evaluation of this standard or its impact,  if any, on the
Company's reporting requirements.

Year 2000 Compliance
The Year 2000 issue  results from  computer  programs  being  written  using two
digits  rather  than  four to  define  the  applicable  year.  As the year  2000
approaches,  systems  using such  programs may be unable to  accurately  process
certain  date-based  information.  To the  extent  that the  Company's  software
applications  contain source code that is unable to interpret  appropriately the
upcoming  calendar  year  2000  and  beyond,   some  level  of  modification  or
replacement of such  applications will be necessary to avoid system failures and
the  temporary  inability  to  process  transactions  or engage in other  normal
business activities.

Beginning in 1995 the Company  formed  project teams to assess the impact of the
Year 2000 issue on the software and hardware utilized in the Company's  internal
operations.  The project teams are staffed primarily with representatives of the
Company's Information Systems and Technology departments and report on a regular
basis to senior management and the Company's Board of Directors.

The initial phase of the Year 2000 project was  assessment  and  planning.  This
phase is  substantially  complete  and  included an  assessment  of all computer
hardware,  software,  systems and processes ("IT  Systems") and  non-information
technology systems such as telephones, clocks, scales, refrigeration controllers
and other  equipment  containing  embedded  microprocessor  technology  ("Non-IT
Systems").  The completion of upgrades,  validation and forward date testing for
all systems is scheduled  for third  quarter of 1999  although many systems have
been completed. The Company expects to successfully implement the remediation of
the IT Systems and Non-IT Systems.

In addition to the remediation of the IT systems and Non-IT systems, the Company
has identified  relationships with third parties,  including vendors,  suppliers
and service  providers,  which the Company believes are critical to its business
operations.  The Company has been communicating with these third parties through
questionnaires,  letters and  interviews in an effort to determine the extent to
which they are addressing  their Year 2000 compliance  issues.  The Company will
continue to communicate  with,  assess the progress of, and monitor the progress
of these third parties in resolving Year 2000 issues.

The total costs to address the  Company's  Year 2000 issues are  estimated to be
approximately $43 million,  of which  approximately $28 million has been or will
be expensed and approximately $15 million has been or will be capitalized. These
costs include expenditures accelerated for Year 2000 compliance.  As of July 29,
1999,  the Company has spent  approximately  95% of the estimated  costs.  These
costs have been funded through operating cash flow and represent a small portion
of the Company's IT budget.

The  Company is  dependent  on the proper  operation  of its  internal  computer
systems  and  software  for  several  key  aspects of its  business  operations,
including  store  operations,   merchandise  purchasing,  inventory  management,
pricing,   sales,   warehousing,   transportation,   financial   reporting   and
administrative  functions. The Company is also dependent on the proper operation
of the computer systems and software of third parties  providing  critical goods
and  services  to  the  Company,   including   vendors,   utilities,   financial
institutions,  government  entities and others.  The Company  believes  that its
efforts will result in Year 2000 compliance. However, the failure or malfunction

                                       16
<PAGE>

of internal or external  systems could impair the  Company's  ability to operate
its business in the ordinary course and could have a material  adverse effect on
its results of operations.

The  Company  is  currently  developing  its  contingency  plans and  intends to
formalize these plans with respect to its most critical  applications during the
third  quarter  of 1999.  Contingency  plans  may  include  manual  workarounds,
increased inventories and extra staffing.

Environmental
The Company has identified environmental contamination at certain of its stores,
warehouse, office and manufacturing facilities (related to current operations as
well as  previously  disposed  of  businesses)  which are  primarily  related to
underground  petroleum storage tanks (USTs) and ground water contamination.  The
Company  conducts an on-going  program for the  inspection and evaluation of new
sites proposed to be acquired by the Company and the  remediation/monitoring  of
contamination  at existing and  previously  owned  sites.  Although the ultimate
outcome and  expense of  environmental  remediation  is  uncertain,  the Company
believes that the required  costs of  remediation,  UST upgrades and  continuing
compliance with  environmental  laws will not have a material  adverse effect on
the financial condition of the Company.

Cautionary  Statement  for Purposes of "Safe Harbor  Provisions"  of the Private
Securities Litigation Reform Act of 1995 From time to time, information provided
by  the   Company,   including   written   or  oral   statements   made  by  its
representatives,  may  contain  forward-looking  information  as  defined in the
Private  Securities  Litigation  Reform Act of 1995,  including  statements with
respect to the Merger and future  performance  of the  combined  companies.  All
statements, other than statements of historical facts, which address activities,
events or developments that the Company expects or anticipates will or may occur
in the future,  including  such things as expansion  and growth of the Company's
business,  future  capital  expenditures  and the Company's  business  strategy,
contain forward-looking  information. In reviewing such information it should be
kept in mind that actual results may differ  materially  from those projected or
suggested in such forward-looking information.  This forward-looking information
is based on various factors and was derived utilizing numerous assumptions. Many
of these factors have  previously  been identified in filings or statements made
by or on behalf of the Company.

Important  assumptions  and other  important  factors  that could  cause  actual
results  to  differ  materially  from  those  set  forth in the  forward-looking
information  include  changes  in  the  general  economy,  changes  in  consumer
spending, competitive factors and other factors affecting the Company's business
in or beyond the Company's control. These factors include changes in the rate of
inflation,  changes  in state or  federal  legislation  or  regulation,  adverse
determinations   with  respect  to   litigation   or  other  claims   (including
environmental  matters),  labor  negotiations,  adverse  effects  of  failure to
achieve  Year 2000  compliance,  the  Company's  ability to recruit  and develop
employees,  its ability to develop new stores or complete remodels as rapidly as
planned,  its ability to implement  new  technology  successfully,  stability of
product costs and the Company's ability to integrate the operations of ASC.

Other factors and assumptions  not identified  above could also cause the actual
results  to  differ  materially  from  those  set  forth in the  forward-looking
information.   The  Company  does  not   undertake  to  update   forward-looking
information contained herein or elsewhere to reflect actual results,  changes in
assumptions  or  changes  in  other  factors   affecting  such   forward-looking
information.

                                       17
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                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings
Three civil  lawsuits  filed in  September  1996 as  purported  statewide  class
actions in  Washington,  California  and Florida and two civil lawsuits filed in
April 1997 in federal  court in Boise,  Idaho,  as purported  multi-state  class
actions  covering the remaining states in which the Company operated at the time
have been brought against the Company  raising various issues that include:  (i)
allegations  that the  Company  has a  widespread  practice  of  permitting  its
employees  to work  "off-the-clock"  without  being paid for their work and (ii)
allegations  that the  Company's  bonus  and  workers'  compensation  plans  are
unlawful.  Four of these suits are being  sponsored  and  financed by the United
Food and Commercial Workers (UFCW) International Union. The five suits have been
consolidated in Boise, Idaho. The consolidated complaint for these suits further
alleges claims under the Employee  Retirement  Income Security Act. In addition,
three  other  similar  suits  have been  filed as  purported  class  actions  in
Colorado, New Mexico and Nevada which, in effect,  duplicate the coverage of the
UFCW-sponsored suits under state law. These three cases have been transferred to
the federal court in Boise, Idaho.

The Company is committed to full compliance with all applicable laws. Consistent
with this commitment,  the Company has firm and long-standing  policies in place
prohibiting  off-the-clock  work  and has  structured  its  bonus  and  workers'
compensation  plans to comply with applicable law. The Company believes that the
UFCW-sponsored suits are part of a broader and continuing effort by the UFCW and
some of its locals to pressure  the Company to unionize  employees  who have not
expressed  a  desire  to be  represented  by a union.  The  Company  intends  to
vigorously  defend  against  all of these  lawsuits,  and,  at this stage of the
litigation, the Company believes that it has strong defenses against them.

On September 13, 1996, a class action lawsuit captioned  McCampbell,  et. al. v.
Ralphs Grocery Company, et. al. was filed in the San Diego Superior Court of the
State of California  against ASC (Lucky) and two other grocery chains  operating
in southern  California.  The complaint  alleged,  among other things,  that ASC
(Lucky)  and  others  conspired  to fix the  retail  price  of eggs in  southern
California.  On  September  2, 1999, a jury verdict was rendered in favor of ASC
(Lucky) and the two other grocery chains.

Although  these  lawsuits  are  subject  to the  uncertainties  inherent  in the
litigation process, based on the information presently available to the Company,
management  does not expect the ultimate  resolution  of these actions to have a
material adverse effect on the Company's financial condition.

The Company is also involved in routine litigation incidental to operations.  In
the opinion of management,  the ultimate  resolution of these legal  proceedings
will not have a material adverse effect on the Company's financial condition.

Item 2.  Changes in Securities
In accordance with the Company's $1.5 billion revolving credit agreement and the
amended $200 million term loan  agreement  between ASC and a group of commercial
banks, the Company's  consolidated tangible net worth, as defined,  shall not be
less than $2.1 billion.

Item 3.  Defaults upon Senior Securities
Not applicable.

Item 4.  Submission of Matters to a Vote of Security Holders
Information  regarding the Company's Annual meeting of Stockholders  held on May
28, 1999,  was included  under Item 4 of the Company's Form 10-Q for the quarter
ended April 29, 1999.

                                       18
<PAGE>

Item 5.  Other Information
Effective  with  the  Merger  consummation  on  June  23,  1999,  the  following
individuals were appointed to the Company's Board of Directors:

       Teresa Beck                                          Class I
       Victor L. Lund                                       Class I
       Fernando R. Gumucio                                  Class II
       Arthur K. Smith                                      Class II
       Pamela G. Bailey                                     Class III
       Henry I. Bryant                                      Class III

Item 6.  Exhibits and Reports on Form 8-K
a.  Exhibits

      Number   Description
      27       Financial data schedule for the 26 weeks ended July 29, 1999.

      27.1     Restated financial data schedule for the quarter ended April 29,
               1999.

      27.2     Restated financial data schedules for the years ended January 28,
               1999, January 29, 1998, and January 30, 1997.

      27.3     Restated financial data schedules for the quarters ended  October
               29, 1998, July 30, 1998, and April 30, 1998.

      27.4     Restated financial data schedules for the quarters ended  October
               30, 1997, July 31, 1997, and May 1, 1997.

b.  The  following  reports on Form 8-K were filed during the quarter ended July
    29, 1999:

     Current Report on Form 8-K dated July 2, 1999, regarding the June 23, 1999,
     consummation of the merger between Albertson's, Inc.  and  American  Stores
     Company.

     Current  Report on Form 8-K dated July 16, 1999,  containing the following:
     1) Audited  financial  statements of American  Stores Company as of January
     30, 1999, January 31, 1998, and February 1, 1997, and for each of the three
     years  ended  January  30,  1999;  2)  Audited  supplemental   consolidated
     financial  statements as of January 28, 1999, January 29, 1998, and January
     30, 1997,  and for each of the three years ended  January 28,  1999,  which
     have been  restated as if  Albertson's  and ASC had been  combined  for all
     periods presented; 3) Unaudited interim supplemental consolidated financial
     statements  as of April 29, 1999,  and for the 13 week periods  ended April
     29, 1999,  and April 30, 1998,  which have been restated as if  Albertson's
     and ASC had been combined for all periods presented;  and, 4) Unaudited pro
     forma  combined  financial  data as of April 29,  1999,  for the year ended
     January 28, 1999, and for the 13 weeks ended April 29, 1999.


     Current Report on Form 8-K/A dated August 27, 1999,  regarding a correction
     to a  statement  made in the  Current  Report on Form 8-K filed on July 16,
     1999.

                                       19

<PAGE>


                                    SIGNATURE


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                                                ALBERTSON'S, INC.
                                       ---------------------------------
                                                  (Registrant)



Date:    September 8, 1999              /S/ A. Craig Olson
       ---------------------           ---------------------------------
                                        A. Craig Olson
                                        Executive Vice President
                                        and Chief Financial Officer

                                       20
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