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

(dollars in millions, except per share data)



The New Albertson's

A new leadership  team has been assembled to take  Albertson's  into the future.
This team has  identified  many  actions  and  programs  with which to drive the
Company's future competitiveness, profitability and return on invested capital.

One of the first actions taken was to identify and  communicate  internally  and
externally five strategic imperatives that serve as a guide and a filter for all
future actions. These five imperatives, together with the major actions taken to
date, follow:

1)   Aggressive  Cost and  Process  Control.  Each  main  category  of  expense,
     including   labor  is  rigorously   monitored  by  a  member  of  executive
     management.  A Board approved  restructuring plan that included a Voluntary
     Separation  Plan and  Involuntary  Severance  Plan resulted in a 20 percent
     reduction in corporate and administrative  staff above store level. Through
     the continued  focus on expenses,  overhead and store processes the Company
     expects to achieve  $250 in  annualized  expense  reductions  by the second
     quarter of Fiscal  2002 and an  additional  $250 by mid 2003 for a total of
     $500 in targeted annualized cost reductions.

2)   Maximize Return on Invested  Capital.  The Company has implemented a formal
     process to review and  measure all  significant  investments  in  corporate
     assets.  The goal of the Company is to hold a number 1 or 2 market share in
     an area, or have a plan of action which  provides a reasonable  expectation
     of achieving  this goal in order to continue to maintain an  investment  in
     that area. A thorough review was completed at both the individual  asset or
     store level and at the market area  level.  As a result of the review,  the
     Company  identified  165  underperforming  stores  and on  July  18,  2001,
     announced its  commitment to close and dispose the identified  stores.  The
     Company  closed 80 of these stores as of January 31,  2002,  and expects to
     sell or close the remaining 85 stores by mid 2002. In addition, the Company
     formulated  plans to accelerate the disposal of surplus property through an
     auction  process for owned  properties  and  aggressive  lease  termination
     negotiations   for  leased   properties.   As  a  result  of  the   initial
     restructuring, the number of division offices was reduced from 19 to 15.

     During the fourth quarter of 2001,  Albertson's  sold 80 New  England  Osco
     drugstores.

     Additionally, the Company also made the decision to exit Miami, Florida and
     the Springfield/Joplin, Missouri markets.

     On March 13, 2002, the  Company  announced  a  second  phase  in the  asset
     rationalization process. As a result, the Company will completely exit four
     underperforming markets: Memphis, Tennessee; Nashville, Tennessee; Houston,
     Texas;  and San Antonio,  Texas.  These  market exits will occur  through a
     combination  of store  closures  and store  sales  and  involve  a total of
     95 stores.   In connection with this action, the number of division offices
     will be further reduced from 15 to 11 and  the Tulsa, Oklahoma and Houston,
     Texas distribution facilities will be sold or closed.  The Company recently
     announced the sale of its Tulsa,  Oklahoma distribution facility to Fleming
     Companies,  Inc.  This sales  agreement  also  includes a long-term  supply
     arrangement  under which Fleming will provide  procurement and distribution
     services for Albertson's Oklahoma and Nebraska stores.


                                          Albertson's, Inc. 2001 Annual Report 1

<PAGE>


     The 2002 capital expenditure  program  will  shift  to  more  remodels  and
     replacement  stores.   Also,   investments  in  the  Company's   technology
     infrastructure  both in the stores and in the back  office will be a strong
     focus of the 2002 capital spending program.

3)   Customer-focused  Approach  to Growth.  The  Company  intends to  re-direct
     non-value added dollars saved from the expense and process control programs
     back into the  marketplace  in order to impact  customers and drive growth.
     Albertson's  focus is on the following  programs that are intended to drive
     customer  loyalty and  profitable  sales growth.  A  company-wide  "Service
     First,  Second to None" program is  reinvigorating  the employees' focus on
     customer  service.  A "Focus on Fresh" initiative is improving the delivery
     of fresh foods  throughout the Company's fresh  departments.  The Company's
     Jewel-Osco  stores  in  Chicago,  Illinois  have  a  decade  of  experience
     operating a unique dual brand food and drugstore format. This unique format
     was rolled out to the  Tucson,  Arizona  and Reno,  Nevada  markets  during
     Fiscal 2001 and will continue to be introduced to additional markets during
     Fiscal 2002.  During the fourth quarter of 2001,  the Company  expanded its
     loyalty  card program to the  Dallas/Fort  Worth,  Texas area.  Albertson's
     plans to roll out loyalty card programs to additional markets during Fiscal
     2002.  Albertson's  private label product  program will be enhanced  during
     2002,  with a goal of developing a premier program and increasing its sales
     penetration in this category.

4)   Company-wide  Focus on Technology.  The Company has embraced a company-wide
     focus on  technology  with the goal of  becoming an  industry  leader.  The
     Company  plans to commit a greater  share of its  capital  expenditures  to
     information  and  process  technology  over the next three to five years to
     serve  customers  and  improve  operating  efficiencies.  The  Company  has
     recently  rolled  out  its  Albertsons.com   on-line  shopping  service  to
     additional markets. With these expansions,  Albertsons.com is now available
     to more than 700 zip codes in California, Oregon and Washington.

5)   Energized  Associates.  Albertson's  will strive to become the  employer of
     choice in the food and  drugstore  industry.  The  Company  plans to reduce
     bureaucracy and layers of management, build stronger communication systems,
     improve  training  programs  and  implement  new  performance-based  reward
     programs.  To instill a sense of ownership at the store level,  the Company
     announced  that as of November 1, 2001,  all store  directors  and pharmacy
     managers are now eligible for stock options.


Business Combination

On June  23,  1999,  Albertson's,  Inc.  ("Albertson's"  or the  "Company")  and
American  Stores Company  ("ASC")  consummated  a  merger  with  the issuance of
177 million  shares  of  Albertson's common stock (the  "Merger").   The  Merger
constituted a tax-free reorganization and has been accounted for as a pooling of
interests for accounting and financial reporting purposes.


Critical Accounting Policies

The Company's  discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting  principles  generally accepted
in the United States of America.  The preparation of these financial  statements
requires the Company to make estimates and  judgements  that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent  assets and liabilities.  On an ongoing basis, the Company  evaluates
its estimates,  including  those related to bad debts,  inventories,  intangible
assets,  income taxes,  assets held for sale,  impairment of long-lived  assets,
self-insurance,  restructuring,  benefit  costs,  contingencies,  litigation and
unearned income. The Company bases its estimates on historical experience and on
various other  assumptions and factors that are believed to be reasonable  under
the  circumstances,  the  results of which form the basis for making  judgements
about the  carrying  values  of  assets  and  liabilities  that are not  readily
apparent from other sources. The Company, based on its ongoing review, will make
adjustments where facts and circumstances dictate. Historically,  actual results
have not  significantly  deviated  from  those  determined  using the  estimates
described above.


                                          Albertson's, Inc. 2001 Annual Report 2

<PAGE>


The Company believes the following critical accounting policies are important to
the  portrayal  of the  Company's  financial  condition  and results and require
management's most difficult,  subjective or complex judgments, often as a result
of the need to make  estimates  about the effect of matters that are  inherently
uncertain.

SELF-INSURANCE  The Company is primarily self-insured for workers' compensation,
automobile and general  liability costs. The Company records its  self-insurance
liability,  determined  actuarially,  based on claims  filed and an  estimate of
claims  incurred but not yet  reported.  Any  actuarial  projection  of ultimate
losses is subject to a high degree of variability.  Sources of this  variability
are numerous and include,  but are not limited to, future  economic  conditions,
court decisions and legislative  actions.  The Company's  workers'  compensation
future  funding  estimates  anticipate  no  change  in  the  benefit  structure.
Statutory changes could have a significant impact on future claim costs.

The Company's  workers'  compensation  liabilities are from claims  occurring in
various states. Individual state workers' compensation regulations have received
a  tremendous  amount  of  attention  from the  state's  politicians,  insurers,
employers  and  providers,  as well as the public in general.  Recent years have
seen an escalation in the number of legislative  reforms,  judicial  rulings and
social phenomena affecting this business. The changes in a state's political and
economic environment increase the variability in the unpaid claim liabilities.

ASSET IMPAIRMENTS  The Company accounted for the impairment of long-lived assets
in accordance with Statement of Financial  Accounting  Standards  (SFAS) No. 121
and, beginning in 2002, will account for it in accordance with SFAS No. 144. For
assets to be held and used, the Company tests for impairment using  undiscounted
cash flows and calculates the amount of impairment  using discounted cash flows.
For  assets  held for sale,  impairment  is  recognized  based on the  excess of
remaining  book value over expected  recovery  value.  The recovery value is the
fair  value as  determined  by  independent  quotes  or  expected  sales  prices
developed by internal  specialists.  Estimates of future cash flows and expected
sales prices are judgments based upon the Company's  experience and knowledge of
local  operations  and cash flows that are  projected for several years into the
future. These estimates can be significantly  impacted by changes in real estate
market  conditions,  the economic  environment,  capital spending  decisions and
inflation.

For  properties  to be closed that are under  long-term  lease  agreements,  the
present  value of any  remaining  liability  under the lease,  discounted  using
risk-free  rates and net of  expected  sublease  recovery,  is  recognized  as a
liability  and  expensed.  If the real estate and leasing  markets  change,  the
assumptions regarding sublease recovery could significantly impact the Company's
recorded liability.

RESTRUCTURING The Company records restructuring charge liabilities in accordance
with Emerging  Issues Task Force (EITF) Issue No. 94-3.  The estimates of future
liabilities may change,  requiring the recording of additional  closure costs or
the reduction of liabilities  already recorded.  Changes in estimates occur when
exit costs are more or less costly than originally estimated.

PENSION COSTS   Many of the Company's associates are covered by  noncontributory
defined  benefit  pension  plans.  The  Company  accounts  for  these  costs  in
accordance  with SFAS No. 87. That  statement  requires the Company to calculate
pension  expense  and  liabilities  using  actuarial  assumptions,  including  a
discount rate and long-term returns on assets.  Actual returns on plan assets in
excess of return  assumptions have, in past years, kept pension expense and cash
contributions  to the plans at modest levels.  Recent weaker market  performance
may significantly  increase pension expense and cash contributions in the future
unless asset returns again exceed the assumptions used.  Changes in the interest
rates used to determine the discount  rate may also cause  volatility in pension
expense and cash contributions.




                                          Albertson's, Inc. 2001 Annual Report 3

<PAGE>


Results of Operations

Sales for 2001 were  $37,931  compared to $36,762 in 2000 and $37,478 in 1999 (a
53-week  year).   The  following  table  sets  forth  certain  income  statement
components  expressed  as a percent to sales,  and the  year-to-year  percentage
changes in the amounts of such components:


<TABLE>
<CAPTION>
                                                               PERCENT TO SALES                PERCENTAGE CHANGE
------------------------------------------------------ -------------------------------- -------------------------------
                                                            2001       2000       1999   2001 VS. 2000   2000 VS. 1999
------------------------------------------------------ ---------- ---------- ---------- --------------- ---------------
<S>                                                       <C>        <C>        <C>              <C>              <C>
Sales                                                     100.00     100.00     100.00             3.2            (1.9)
Gross profit                                               28.41      28.38      27.52             3.3             1.2
Selling, general and administrative expenses               23.90      23.79      23.06             3.6             1.2
Restructuring charges and other                             1.23         -          -             n.m.            n.m.
Gain on sale of New England Osco drugstores                (0.14)        -          -             n.m.            n.m.
Merger-related (credits) charges                           (0.04)      0.07       1.06            n.m.            n.m.
Litigation settlement charge                                  -          -        0.10            n.m.            n.m.
Operating profit                                            3.46       4.52       3.31           (21.0)           34.0
Interest expense, net                                       1.14       1.05       0.94            12.1             9.2
Earnings before income taxes and extraordinary item         2.30       3.46       2.40           (31.5)           41.6
Net earnings                                                1.32       2.08       1.08           (34.4)           89.2

n.m. - not meaningful
</TABLE>



Increases in sales are primarily  attributable  to the continued  development of
new stores and identical and comparable store sales  increases.  During 2001 the
Company  opened or acquired 144 stores,  remodeled 103 stores and closed or sold
235 stores (including the sale of 80 New England Osco drugstores and the closure
of 80 stores due to the Company's restructuring plan). Net retail square footage
was 98.1  million  square feet as of the end of Fiscal 2001 and 2002.  Adjusting
for   the   effect  of   the  sale  of   80  New  England  Osco  drugstores  and
80 restructuring  closures, net  retail square  footage would  have increased by
4.0% during  2001.  During 2000,  net retail  square footage  increased by 2.5%.
Identical store sales, stores that have been in  operation  for two full  fiscal
years,  increased 0.8% in 2001 and 0.3% in 2000.  Comparable store sales,  which
include replacement stores, increased 1.3% in 2001 and 0.6% in  2000.  Identical
and comparable store  sales continued to  increase through higher average ticket
sales per  customer.  Management  estimates  that overall  inflation in products
the Company sells was flat in 2001, there was overall  deflation of 0.4% in 2000
and overall inflation of 0.2% in 1999.

In addition to store  development,  the Company has increased  sales through its
continued   implementation   of  best  practices  across  the  Company  and  its
customer-focused  approach  to growth.  These  programs  include:  the "Focus on
Fresh"  initiative;  a renewed  focus on customer  service  through the "Service
First,  Second to None" program;  implementation  of the preferred  loyalty card
program;  dual branded combination stores; and expansion of the on-line shopping
service.  Other solutions include neighborhood  marketing,  targeted advertising
and exciting new and remodeled stores.

Gross profit, as a percent to sales,  remained  relatively flat between 2001 and
2000.  The increase in 2000 over 1999 resulted  primarily from an improved sales
mix of partially prepared,  value-added  products.  Gross profit improvements in
2000 were also  realized  through the  continued  utilization  of the  Company's
distribution  facilities  and  increased  buying  efficiencies.  The  Merger has
created buying synergies and margin improvements from the implementation of best
practices  across the  Company.  The pre-tax LIFO  adjustment,  (as a percent to
sales), decreased gross profit by $10 (0.03%) in 2001, increased gross profit by
$23 (0.06%) in 2000 and decreased  gross profit by $30 (0.08%) in 1999.  The net
pre-tax  LIFO charge for 2001 was $5,  comprised  of $10 of charges  recorded in
cost of sales,  $3 of credits  recorded  with gain on sale of New  England  Osco
drugstores and $2 of credits recorded with restructuring and other.


                                          Albertson's, Inc. 2001 Annual Report 4

<PAGE>


Cost of sales include vendor  allowances and advertising  expense related to the
Company's  buying  and  merchandising  activities.   Vendor  allowances  consist
primarily of promotional  allowances,  advertising  allowances  and, to a lesser
extent,  slotting  allowances.  The Company  utilizes vendor  allowances to fund
pricing promotions,  advertising expense and slotting expense. Gross advertising
expense (excluding  advertising  allowances)  totaled $537 in 2001, $550 in 2000
and $654 in 1999.

Selling,  general  and  administrative  (SG&A)  expenses  as a percent  to sales
increased  in 2001,  primarily  due to workers'  compensation  costs and benefit
expenses  caused by sharply higher health care costs.  The 2001 increase in SG&A
expenses was partially  offset by reductions in direct labor costs. The increase
in 2000 over 1999 was  primarily  due to  increased  salary and related  benefit
costs  resulting  from the Company's  initiatives to increase  sales,  increased
depreciation  expense associated with the Company's expansion program and larger
losses from asset impairment and dispositions.

Other income, for the year ended January 31, 2002, includes $16 of charges for a
decrease in company-owned  life insurance,  and $8 of credits for stock received
from the demutualization of two insurance companies.

The Company's effective income tax rate from continuing  operations for 2001 was
42.6%,  as compared to 40.0% for 2000 and 52.5% for 1999.  The increase for 2001
over  2000,  is  due to  lower  earnings  before  income  taxes,  non-deductible
restructuring  expenses and company-owned  life insurance.  The effective income
tax rate for 1999 was impacted by the  non-deductible  portion of merger-related
costs.


Restructuring and Other Non-Routine Items


Restructuring

On July 17, 2001, the Company's Board of Directors approved a restructuring plan
designed   to   improve   future   financial   results   and  to  drive   future
competitiveness.  The plan includes certain exit costs and employee  termination
benefits,  as described below,  that will be incurred within  approximately  one
year of the Board approval date.

<TABLE>
<CAPTION>
         ACTION                                                       STATUS
         ------                                                       ------
<S>     <C>                                                           <C>
         Reduction in administrative and corporate overhead           Substantially complete
         Closing of 165 underperforming retail stores                 80 closed as of year end
         Consolidation and elimination of four division offices       Completed
         Process streamlining                                         Ongoing
</TABLE>

As a result of the  restructuring  plan, the Company recorded pre-tax charges of
$509 ($314 after tax or $0.77 per diluted  share) made up of $468  restructuring
and  other, and $41 of  period  costs  (including  $35 of  inventory  write-down
recorded  in cost of  sales)  for the 52  weeks  ended  January  31,  2002.  The
following  table  presents  the  pre-tax   charges,   incurred  by  category  of
expenditure,  and  related  restructuring  reserves  included  in the  Company's
Consolidated Balance Sheets:

<TABLE>
<CAPTION>
                                   EMPLOYEE                         LEASE
                                  SEVERAMCE          ASSET    TERMINATION
                                      COSTS    IMPAIRMENTS          COSTS      OTHER      TOTAL
                                ------------ -------------- -------------- ---------- ----------
<S>                                    <C>           <C>             <C>        <C>        <C>
Additions                              $ 44           $396           $ 57       $ 12       $509
Utilization                              33            396              7         12        448
                                ------------ -------------- -------------- ---------- ----------
Balance at January 31, 2002            $ 11           $ -            $ 50       $ -        $ 61
                                ============ ============== ============== ========== ==========
</TABLE>

Employee  severance  costs consist of severance  pay,  health care  continuation
costs and  outplacement  service  costs for employees  who  participated  in the
Company's  Voluntary  Separation  Plan and for employees who were  terminated or
notified of  termination  under the  Company's  Involuntary  Severance  Plan. In
accordance with the  restructuring  plan,  1,341  managerial and  administrative
positions  above  store  level  have  been  identified  for  termination.  As of
January 31, 2002, 995 positions have been terminated. The remaining terminations
will occur as originally planned.


                                          Albertson's, Inc. 2001 Annual Report 5

<PAGE>


As part of the Company's  restructuring plan, all stores were reviewed utilizing
a methodology  based on return on invested  capital.  Based on this review,  the
Company identified and committed to close and dispose 165 underperforming stores
in 25  states.  All stores  identified  for  closure  were  evaluated  for asset
impairment by comparing the fair value,  less selling cost, to the recorded book
value.  Fair value used in the impairment  calculation  was based on third party
offers or market value for  comparable  properties.  For stores under  operating
lease agreements, the present values of any remaining liability under the lease,
net of sublease  recoveries,  or lease  termination  costs were expensed.  As of
January 31, 2002, 80 stores have been closed.

Assets  to  be  disposed  of  include  land,  buildings,   equipment,  leasehold
improvements,  and inventory for stores and division  offices that were included
in the restructuring  discussed above.  These assets are reported as assets held
for sale in the Company's Consolidated Balance Sheets.

Other costs include various expenses  related to the Company's  decision to exit
certain insignificant businesses and the consolidation of the division offices.

The  restructuring  plan also  included  actions to  accelerate  the disposal of
surplus property which included  terminating  leases through  negotiated buyouts
and selling properties  through auctions.  During 2001, a $51 pre-tax adjustment
was recorded in selling, general and administrative expenses and included in the
closed store  reserves for the additional  charges  expected to be incurred as a
result of these actions.


Merger-Related Charges (Credits)

Results of operations  include $6 of  merger-related  credits ($4 after tax) for
fiscal year 2001, $151 of merger-related charges ($93 after tax) for fiscal year
2000, and $683 of merger-related  charges ($529 after tax) for fiscal year 1999.
The following table presents the pre-tax charges (credits)  incurred by category
of  expenditure   and   merger-related   accruals   included  in  the  Company's
Consolidated Balance Sheets:


<TABLE>
<CAPTION>
                                             ASSET                     INTEGRATION
                                       IMPAIRMENTS      SEVERANCE        AND OTHER          TOTAL
                                  ----------------- -------------- ---------------- --------------
<S>                                          <C>            <C>              <C>            <C>
Additions                                    $ 264          $ 124            $ 343          $ 731
Adjustments                                    (22)            (7)             (19)           (48)
Utilization                                   (242)           (93)            (315)          (650)
                                  ----------------- -------------- ---------------- --------------
Balance at February 3, 2000                      -             24                9             33
Additions                                       36             21               97            154
Adjustments                                                    (3)                             (3)
Utilization                                    (36)           (35)            (100)          (171)
                                  ----------------- -------------- ---------------- --------------
Balance at February 1, 2001                      -              7                6             13
Additions                                        8              2                5             15
Adjustments                                    (20)            (1)              (1)           (22)
Utilization                                     12             (3)             (10)            (1)
                                  ----------------- -------------- ---------------- --------------
Balance at January 31, 2002                  $   -          $   5            $   -          $   5
                                  ================= ============== ================ ==============
</TABLE>


                                          Albertson's, Inc. 2001 Annual Report 6

<PAGE>


Asset  impairments  include  the loss on  disposal of  duplicate  and  abandoned
facilities,   including  administrative  offices,  intangibles  and  information
technology  equipment  which were  abandoned by the Company.  Operations for the
year ended January 31, 2002, included $15 of pre-tax credits associated with the
reversal  of previous  impairment  charges  related to the sale of the  American
Stores' Tower in Salt Lake City,  Utah.  The Company  closed on the sale of this
property on May 15, 2001, thus completing the asset dispositions  resulting from
the Merger.

Severance  consists of retention  costs for certain  individuals and termination
benefit liabilities for 633 individuals who have already been terminated.

Integration  and other costs consist  primarily of  incremental  transition  and
integration  costs associated with integrating the operations of Albertson's and
ASC,  and  are  being  expensed  as  incurred.   These  include  such  costs  as
advertising,   labor  associated  with  system   conversions  and  training  and
relocation  costs.  Also  included are  transaction  and  financing  costs which
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.

In connection with the Merger,  the Company recorded net pre-tax charges through
the first two  quarters  of 1999 of $47  related to Limited  Stock  Appreciation
Rights.  This is included in the Integration and Other category above.


Other Non-Routine Items

The Company  recorded a $54 pre-tax  one-time gain during the fourth  quarter of
2001 resulting from the sale of 80 New England Osco drugstores.

The  Company  recorded,  in selling,  general  and  administrative  expenses,  a
$36 pre-tax one-time gain during the fourth  quarter of 2001  resulting  from an
amendment to the Company's long-term  disability plan. The amendment changed the
salary continuation feature from a cumulative benefit based on years of service,
to a set percentage of salary benefit.

The Company  recorded a $20 pre-tax one-time charge during first quarter of 2000
and  included it in  selling,  general  and  administrative  expenses to reflect
liabilities  related to certain  previously  assigned  leases and  subleases  to
tenants who are in bankruptcy.

The Company  recorded a $37 pre-tax  one-time charge during the third quarter of
1999  resulting  from an  agreement  reached to settle eight  multi-state  cases
combined in the United  States  District  Court in Boise,  Idaho,  which  raised
various issues including "off-the-clock" work allegations.  Under the agreement,
current and former  employees  who meet  eligibility  criteria may present their
claims to a settlement administrator. While the Company cannot specify the exact
number of  individuals  who are likely to submit  claims and the exact amount of
their claims, the one-time charge is the Company's current estimate of the total
monetary liability, including attorney fees, for all eight cases.




                                          Albertson's, Inc. 2001 Annual Report 7

<PAGE>


Summary of Restructuring and Other Non-Routine Items

Due to the significance of the  restructuring  charges,  merger-related  charges
(credits),  and other non-routine  items and their effect on operating  results,
the following table is presented to assist in the comparison of income statement
components without these charges and credits:

<TABLE>
<CAPTION>
                                              52 WEEKS ENDED                     52 WEEKS ENDED        53 WEEKS ENDED
                                             JANUARY 31, 2002                   FEBRUARY 1, 2001      FEBRUARY 3, 2000
----------------------------- ----------------------------------------------- --------------------- ----------------------
                              AS REPORTED     ONE-TIME      W/O ONE-TIME          W/O ONE-TIME          W/O ONE-TIME
----------------------------- ------------ ------------ --------------------- --------------------- -----------------------
<S>                               <C>                       <C>       <C>         <C>       <C>         <C>       <C>
Sales                             $37,931                   $37,931   100.00%     $36,762   100.00%     $37,478   100.00%
Cost of sales                      27,155      $   (35)      27,120    71.50       26,292    71.52       27,122    72.37
----------------------------- ------------ ------------ ------------ -------- ------------ -------- ------------ --------
Gross profit                       10,776           35       10,811    28.50       10,470    28.48       10,356    27.63
Selling, general and
  administrative  expenses          9,064          (40)       9,024    23.79        8,637    23.49        8,427    22.49
Restructuring charges and
  other                               468         (468)
Gain on sale of New England
  Osco drugstores                     (54)          54
Merger-related credits                (15)          15
----------------------------- ------------ ------------ ------------ -------- ------------ -------- ------------ --------
Operating profit                    1,313          474        1,787     4.71        1,833     4.99        1,929     5.15
Interest expense, net                (432)                     (432)   (1.14)        (385)   (1.05)        (352)   (0.94)
Other (expense) income, net            (8)                       (8)    (.02)          (3)   (0.01)          12     0.03
----------------------------- ------------ ------------ ------------ -------- ------------ -------- ------------ --------
Earnings before income taxes          873          474        1,347     3.55        1,445     3.93        1,589     4.24
Income taxes                          372          180          552     1.46          575     1.56          634     1.69
----------------------------- ------------ ------------ ------------ -------- ------------ -------- ------------ --------
Net earnings                      $   501      $   294      $   795     2.09%     $   870     2.37%     $   955     2.55%
============================= ============ ============ ============ ======== ============ ======== ============ ========
</TABLE>

The costs of the Company's  restructuring  plan and integrating  Albertson's and
ASC have resulted in significant nonrecurring charges  and incremental expenses.
These costs had significant  effects on the results of operations of the Company
for the past three years.  During 2001, the Company  recognized $560 ($345 after
tax) of charges ($442 noncash)  associated with the restructuring plan announced
on July 18, 2001.  In  connection  with  the  restructuring  plan  announced  on
March 13, 2002, the Company  expects to incur  nonrecurring  pre-tax  charges of
approximately  $580, of which,  $510 will be noncash.  Nonrecurring  charges and
expenses  of  implementing  integration  actions,  related to the  Merger,  were
originally  estimated to total $700 after income tax  benefits.  On an after-tax
basis,  and  subsequent to the first quarter 1999, the Company has incurred $634
of merger-related costs and does not expect to exceed its original estimate.


Liquidity and Capital Resources

Cash provided by operating activities during 2001 was $2,092, compared to $1,791
in 2000 and $1,418 in 1999. Cash provided by operating activities in Fiscal 2001
was primarily impacted by noncash  restructuring charges when compared to Fiscal
2000.  Cash  provided  by  operating  activities  in Fiscal  2000 was  primarily
impacted by higher  earnings  when  compared to Fiscal 1999.  Also,  driving the
change is the decrease in  inventories  offset by the decrease in other  current
liabilities, mostly tax related.

The Company's financing activities for 2001 included new long-term borrowings of
$623, a net decrease of commercial paper and bank line borrowing of $1,153,  and
dividend  payments of $309 (which  represents 38.8% of 2001 net earnings without
restructuring and other non-routine items). The Board of Directors, at its March
2002 meeting, maintained the regular quarterly cash dividend of $0.19 per share,
for an effective annual rate of $0.76 per share.

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  reporting  periods.  The Company had no
commercial  paper or bank line  borrowings  outstanding  at January 31, 2002, as
compared to $1,153 outstanding as of February 1, 2001.


                                          Albertson's, Inc. 2001 Annual Report 8

<PAGE>



In support of the  Company's  commercial  paper  program,  the Company had three
credit  facilities  totaling  $1,750 during Fiscal 2001. The first agreement for
$100 expired in February 2002 and was renewed for an  additional  year to expire
in February  2003.  The second  agreement for $700 expired in March 2002 and was
replaced,  based on the Company's  revised  liquidity  requirements,  by a $350,
364-day credit  agreement.  The third  agreement for $950 expires in March 2005.
All of the credit  agreements  contain an option  which would allow the Company,
upon due notice,  to convert any outstanding  amounts at the expiration dates to
term loans. The agreements in place at year end also contain certain  covenants,
the most  restrictive  of which  requires  the Company to maintain  consolidated
tangible net worth, as defined,  of at least $2,100. As of January 31, 2002, the
Company's consolidated tangible net worth, as defined, was approximately $4,200.
Upon the  execution of the $350,  364-day  credit  agreement,  the  consolidated
tangible net worth threshold increased to $3,000, and an additional covenant was
added requiring a fixed charge coverage of at least 2.7 times. As defined in the
new  agreement,  the fixed charge  coverage  ratio based on 2001 results was 4.2
times. No borrowings were outstanding  under the credit facilities as of January
31, 2002, or February 1, 2001.

The  Company  filed a shelf  registration  statement  with  the  Securities  and
Exchange  Commission  (SEC),  which became effective in February 2001 (the "2001
Registration  Statement"),  to  authorize  the  issuance of up to $3,000 in debt
securities.  The Company  intends to use the net proceeds of any securities sold
pursuant to the 2001  Registration  Statement for retirement of debt and general
corporate  purposes,  including the potential  purchase of outstanding shares of
Albertson's common stock.

During  Fiscal  2001,  the  Company  issued  $600 of term  notes  under the 2001
Registration  Statement.  Proceeds were used primarily to repay borrowings under
the Company's  commercial paper program.  As of January 31, 2002, $2,400 of debt
securities remain available for issuance under the 2001 Registration Statement.

During  Fiscal  2000 and Fiscal  1999,  the  Company  issued  $1,200 and $1,300,
respectively of term notes under a prior shelf registration statement filed with
the SEC in 1999.  Proceeds  were used  primarily to repay  borrowings  under the
Company's commercial paper program.

Following the Merger, the Company  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,  certain debt was
extinguished during 1999.

The Board of Directors  adopted a program on December 3, 2001,  authorizing,  at
management's  discretion,  the Company to purchase  and retire up to $500 of the
Company's common stock beginning  December 6, 2001 through December 31, 2002. No
purchases  were made  during  Fiscal  2001.  During  Fiscal  2000,  the  Company
purchased and retired 18.7 million shares of its common stock at a total cost of
$451, or an average price of $24.15 per share, under a Board authorization which
expired on December 6, 2001.

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 adequate to support  currently  planned  business
operations,  acquisitions and capital  expenditures.  Free cash flow (defined as
cash generated by the business after capital expenditures - net of proceeds from
disposals, and dividend payments but before acquisitions, divestitures and share
purchases) was $584 and $(106) in 2001 and 2000,  respectively.  The Company has
short-term  financing  capacity in the form of commercial paper up to $1,400 and
long-term capacity under the 2001 Registration Statement of $2,400.


                                          Albertson's, Inc. 2001 Annual Report 9

<PAGE>


As of January 31, 2002, the Company's credit ratings were as follows:

<TABLE>
<CAPTION>
                                S & P           MOODY'S             FITCH
-------------------- ----------------- ----------------- -----------------
<S>                              <C>               <C>                 <C>
Long-term debt                   BBB+              Baa1                --
Short-term debt                    A2                P2                F2
</TABLE>

The Company  believes that a downgrade in the Company's  current  credit ratings
will have no material  effect on the  fixed-term  debt  portfolio.  There are no
payment  acceleration  provisions in the  Company's  fixed-term  debt  portfolio
related to a  downgrade  in the  Company's  credit  ratings.  The  Company  also
believes  that a downgrade in the Company's  credit  ratings would not adversely
affect its ability to refinance any current  maturities of fixed-term  debt. Any
adverse changes to the Company's credit ratings could limit the Company's access
to the  commercial  paper market and  increase  the cost of debt,  but would not
affect  the  Company's  ability  to  borrow  funds  under the  Company's  credit
facilities.


Contractual Obligations and Commercial Commitments

Albertson's  has assumed  various  financial  obligations and commitments in the
normal course of its operations and financing activities.  Financial obligations
are  considered  to  represent  known future cash  payments  that the Company is
required to make under existing contractual arrangements, such as debt and lease
agreements.  The following  table  represents  the  scheduled  maturities of the
Company's long-term contractual obligations as of January 31, 2002:


<TABLE>
<CAPTION>
                                            LESS THAN 1 YEAR     YEARS 1-3     YEARS 4-5    AFTER  5 YEARS        TOTAL
                                          ------------------- ------------- ------------- ----------------- ------------
<S>                                                    <C>          <C>            <C>             <C>          <C>
Long-term debt                                         $ 123        $  610         $ 205           $ 4,245      $ 5,183
Capital lease obligations (1)                             45            82            74               467          668
Operating leases (1)                                     333           650           559             2,264        3,806
Contracts for purchase of property and
   construction of buildings                             233                                                        233
Other (2)                                                  6             3             1                             10
----------------------------------------- ------------------- ------------- ------------- ----------------- ------------
Total contractual cash obligations                     $ 740        $1,345         $ 839           $ 6,976      $ 9,900
========================================= =================== ============= ============= ================= ============
</TABLE>

(1)  Represents the minimum rents payable and includes  leases  associated  with
     closed  stores  accrued for under the  Company's  restructuring  and closed
     store reserves. Amounts are not offset by expected sublease income.

(2)  Other includes transportation contracts with third parties. The Company has
     entered into energy supply  agreements which have terms through 2006. These
     agreements  include certain  provisions that could potentially  require the
     Company to pay  additional  amounts  if the  actual  usage is less than the
     minimum  usage  per  the  contract  documents  or  if  the  contracts  were
     terminated.  This number is  extremely  difficult  to  estimate  due to the
     uncertainty  of future  energy  usage and  change  in the  market  value of
     energy, therefore no amounts have been included above.


The Company is  contingently  liable as a guarantor of certain  leases that were
assigned  to third  parties  in  connection  with  various  store  closures  and
dispositions.  The Company  believes the  likelihood of a significant  loss from
these  agreements is remote because of the wide  dispersion  among third parties
and remedies  available to the Company  should the primary party fail to perform
under the agreements.

Albertson's commercial commitments as of January 31, 2002, representing possible
commitments triggered by potential future events, are as follows:

<TABLE>
<CAPTION>
                                               TOTAL      YEAR 1    YEARS 2-3    YEARS 4-5  AFTER 5 YEARS
                                          ----------- ----------- ------------ ------------ --------------
<S>                                           <C>         <C>           <C>         <C>             <C>
Available lines of credit                     $1,750      $  800        $   -       $  950          $   -
Letters of credit - standby                       40          40
Letters of credit - commercial                    13          13
----------------------------------------- ----------- ----------- ------------ ------------ --------------
Potential commercial commitments              $1,803      $  853        $   -       $  950          $   -
========================================= =========== =========== ============ ============ ==============
</TABLE>


                                         Albertson's, Inc. 2001 Annual Report 10

<PAGE>


The following  leverage  ratios  demonstrate  the Company's  levels of long-term
financing as of the indicated year end:

<TABLE>
<CAPTION>
                                                                     JANUARY 31, 2002   FEBRUARY 1, 2001
------------------------------------------------------------------- ------------------ ------------------
<S>                                                                              <C>                <C>
Long-term debt and capitalized lease obligations to capital (1)                  47.5%              51.1%
Long-term debt and capitalized lease obligations to total assets                 33.5               37.0

(1) Capital includes long-term debt, capitalized lease obligations and stockholders' equity
</TABLE>


Letters of Credit

The Company had outstanding Letters of Credit of $53 as of January 31, 2002, all
of which were issued under separate bilateral agreements with multiple financial
institutions.  Of the $53  outstanding at year end, $40 were standby  letters of
credit covering primarily workers' compensation or performance obligations.  The
remaining  $13 were  commercial  letters  of  credit  supporting  the  Company's
merchandise  import  program.  The  Company  paid  issuance  fees  that  varied,
depending  on type,  up to 0.50% of the  outstanding  balance  of the  letter of
credit.



Off Balance Sheet Arrangements

Albertson's,  Inc. has no significant  investments  that are accounted for under
the equity method in accordance with accounting principles generally accepted in
the United  States of  America.  Investments  that are  accounted  for under the
equity method have no liabilities  associated with them that would be considered
material to Albertson's.



Capital Expenditures

The Company  continues to retain  ownership of real estate when possible.  As of
January 31, 2002, the Company held title to the land and buildings of 42% of the
Company's stores and held title to the buildings on leased land of an additional
9% of the  Company's  stores.  The  Company  also  holds  title  to the land and
buildings of most of its administrative offices and distribution facilities.

The Company is  committed  to keeping  its stores up to date.  In the last three
years,  the Company has opened or remodeled 630 stores  representing  28% of the
Company's retail square footage as of January 31, 2002. The following summary of
historical  capital  expenditures  includes  capital leases,  stores acquired in
business  and asset  acquisitions,  assets  acquired  with  related debt and the
estimated fair value of property financed by operating leases:


<TABLE>
<CAPTION>
                                                                                 2001              2000              1999
-------------------------------------------------------------------- ----------------- ----------------- -----------------
<S>                                                                           <C>               <C>               <C>
New and acquired stores                                                       $   874           $ 1,066           $ 1,126
Remodels                                                                          348               423               296
Retail replacement equipment, technology and other                                247               170               248
Distribution facilities and equipment                                              64               174               198
-------------------------------------------------------------------- ----------------- ----------------- -----------------
Total capital expenditures                                                      1,533             1,833             1,868
Estimated fair value of property financed by operating leases                     153                99               230
-------------------------------------------------------------------- ----------------- ----------------- -----------------
                                                                              $ 1,686           $ 1,932           $ 2,098
==================================================================== ================= ================= =================
</TABLE>

The Company's strong financial position provides the flexibility for the Company
to grow through its store development program and future acquisitions.


                                         Albertson's, Inc. 2001 Annual Report 11


<PAGE>


Quantitative and Qualitative Disclosures about Market Risk

The  Company  is  exposed  to certain  market  risks  that are  inherent  in the
Company's financial  instruments,  which arise from transactions entered into in
the normal  course of  business.  From time to time,  the  Company  enters  into
certain derivative transactions allowed by the Company's risk management policy.
The Company does not enter into  derivative  financial  instruments  for trading
purposes.  The Company  uses  derivatives  primarily  as cash flow hedges to set
interest rates for forecasted debt issuances, such as interest rate locks.

The Company is subject to  interest  rate risk on its fixed  interest  rate debt
obligations.  Commercial  paper  borrowings  do not  give  rise  to  significant
interest rate risk because these  borrowings  have maturities of less than three
months.  Generally,  the fair  value of debt  with a fixed  interest  rate  will
increase as interest  rates fall,  and the fair value will  decrease as interest
rates rise. The Company  manages its exposure to interest rate risk by utilizing
a combination of fixed rate borrowings and commercial paper borrowings.

The Company has no foreign exchange  exposure and as of January 31, 2002, has no
outstanding derivative transactions.  There have been no material changes in the
primary risk  exposures  or  management  of the risks since the prior year.  The
Company  expects to  continue  to manage  risks in  accordance  with the current
policy.

The table below provides  information  about the Company's debt obligations that
are  sensitive to changes in interest  rates.  For debt  obligations,  the table
presents  principal cash flows and related  weighted  average  interest rates by
expected maturity dates:


<TABLE>
<CAPTION>
                                     2002        2003        2004        2005       2006   THERE-AFTER       TOTAL   FAIR VALUE
----------------------------   ----------- ----------- ----------- ----------- ---------- ------------- ----------- ------------
<S>                                 <C>         <C>         <C>         <C>          <C>       <C>         <C>          <C>
Fixed rate debt obligations         $ 123       $ 106       $ 504       $ 202      $   3       $ 4,245     $ 5,183      $ 5,516
Weighted average interest rate        9.8%        7.2%        6.6%        7.4%       7.8%          7.5%        7.5%
</TABLE>


Related Party Transactions

Albertson's  2001,  2000,  and 1999  transactions  with related  parties are not
considered   material.   See  "Related  Party  Transactions"  in  the  Notes  to
Consolidated Financial Statements.


Recent Accounting Standards

Effective  February  2, 2001,  the  Company  adopted  SFAS No.  133 as  amended,
"Accounting  for Derivative  Instruments and Hedging  Activities."  SFAS No. 133
requires all derivative financial  instruments to be recognized as either assets
or liabilities in the Consolidated Balance Sheet and measured at fair value. The
cumulative  effect of adoption  of SFAS No. 133 as it relates to  interest  rate
locks was a $5 gain (net of taxes).  Losses on  contracts  settled  during  2001
amounted to $1 (net of taxes). These amounts are reported in other comprehensive
income  in the  accompanying  Consolidated  Stockholders'  Equity.  The  amounts
reclassified  from other  comprehensive  income to interest expense for 2001 and
the expected reclassifications for 2002 are insignificant.


                                         Albertson's, Inc. 2001 Annual Report 12

<PAGE>



In June 2001 the  Financial  Accounting  Standards  Board (FASB)  issued two new
pronouncements SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill
and Other Intangible  Assets." SFAS No. 141, which is effective for acquisitions
initiated  after June 30,  2001,  prohibits  the use of the  pooling-of-interest
method for business  combinations  and  establishes the accounting and financial
reporting  requirements for business combinations  accounted for by the purchase
method.  Adoption of this standard had no effect on the financial  statements of
the Company.  SFAS No. 142 requires  that an  intangible  asset that is acquired
shall  be  initially  recognized  and  measured  based on its  fair  value.  The
statement  also  provides that  goodwill  should not be amortized,  but shall be
tested for impairment  annually,  or more frequently if  circumstances  indicate
potential impairment, through a comparison of fair value to its carrying amount.
SFAS No. 142 became effective for Albertson's on February 1, 2002. In accordance
with the  provisions  of SFAS No. 142, the Company will complete the analysis of
goodwill  and other  intangible  assets for  impairment  no later than August 1,
2002, and will record any required impairment by the end of 2002. The Company is
currently  evaluating  the impact of the new  accounting  standard  on  existing
goodwill and other intangible  assets. The ultimate impact of the new accounting
standard has yet to be determined. The net book value of goodwill was $1,468 and
$1,560 as of January  31,  2002 and  February  1, 2001,  respectively.  Goodwill
amortization  expense of $56, $57, and $58 was recorded in 2001, 2000, and 1999,
respectively, and will no longer be recorded in subsequent fiscal years.

In July 2001 the FASB  issued  SFAS No. 143,  "Accounting  for Asset  Retirement
Obligations."  SFAS No. 143 will become effective for Albertson's on January 31,
2003.  This  statement   addresses   financial   accounting  and  reporting  for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. The Company is currently analyzing the effect
that this standard will have on its financial  statements,  but believes it will
not have a significant effect on the financial statements of the Company.

In August 2001 the FASB issued SFAS No. 144,  "Accounting  for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 which replaces SFAS No. 121 and APB
No. 30, became  effective for  Albertson's  on February 1, 2002.  This Statement
retains  the  requirements  to (i)  recognize  an  impairment  loss  only if the
carrying amount of a long-lived  asset is not recoverable  from its undiscounted
cash flows and (ii) measure an  impairment  loss as the  difference  between the
carrying  amount and fair value of the asset.  This Statement  removes  goodwill
from its scope,  eliminating the requirement to allocate  goodwill to long-lived
assets to be tested for  impairment.  This Statement  requires that a long-lived
asset to be abandoned,  exchanged for a similar  productive asset or distributed
to owners in a spin-off,  be  considered  held and used until it is disposed of.
This  Statement  requires  the  accounting  model  for  long-lived  assets to be
disposed of by sale, be used for all long-lived assets,  whether previously held
and used or newly acquired.  Discontinued operations are no longer measured on a
net realizable value basis, and future operating losses are no longer recognized
before they occur.  This Statement  broadens the  presentation  of  discontinued
operations in the income  statement to include a component of an entity  (rather
than a segment of a business). A component of an entity comprises operations and
cash flows that can be clearly  distinguished,  operationally  and for financial
reporting  purposes,  from the rest of the  entity.  The  Company  is  currently
analyzing the effect that this  standard  will have on its financial  statements
and  believes  it will  require  additional  disclosures  but  will  not  have a
significant effect on the operating results of the Company.

EITF Issue  Nos.  00-14,  "Accounting  for  Certain  Sales  Incentives;"  00-22,
"Accounting for Points and Other Time-Based or Volume-Based  Sales and Incentive
Offers, and Offers for Free Products or Services to be Delivered in the Future;"
and 00-25,  "Vendor Income Statement  Characterization  of Consideration  from a
Vendor to a Retailer"  address the  appropriate  accounting  for certain  vendor
contracts and loyalty  programs.  The  Company's  accounting  procedures  are in
compliance with the accounting requirements called for by these Issues.


                                         Albertson's, Inc. 2001 Annual Report 13

<PAGE>



Environmental

The Company has identified  environmental  contamination sites related primarily
to underground petroleum storage tanks and groundwater  contamination at various
store,  warehouse,  office  and  manufacturing  facilities  (related  to current
operations as well as previously  disposed of businesses).  The Company conducts
an ongoing 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. Undiscounted reserves have been established
for each  environmental  contamination  site  unless an  unfavorable  outcome is
remote.  Although the ultimate outcome and expense of environmental  remediation
is uncertain,  the Company  believes that required  remediation  and  continuing
compliance with environmental laws, in excess of current reserves, will not have
a material  adverse  effect on the financial  condition of the Company.  Charges
against earnings for  environmental  remediation were not material in 2001, 2000
or 1999.


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.
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  integration  of the
operations  of  acquired  or  merged  companies,  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  using  various
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 interest rates,
changes in consumer spending,  actions taken by competitors,  particularly those
intended  to  improve  their  market  share,  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, the cost and stability of
energy sources, the Company's ability to recruit,  retain and develop employees,
its ability to develop  new stores or  complete  remodels as rapidly as planned,
its ability to implement new technology  successfully,  the stability of product
costs,  the Company's  ability to integrate the operations of acquired or merged
companies,  the Company's  ability to execute its  restructuring  plans, and the
Company's ability to achieve its five strategic imperatives.

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.


                                         Albertson's, Inc. 2001 Annual Report 14

<PAGE>


CONSOLIDATED
EARNINGS

<TABLE>
<CAPTION>
                                                                               52 WEEKS         52 WEEKS           53 WEEKS
                                                                            JANUARY 31,      FEBRUARY 1,        FEBRUARY 3,
(IN MILLIONS, EXCEPT PER SHARE DATA)                                               2002             2001               2000
------------------------------------------------------------------------ --------------- ---------------- ------------------
<S>                                                                             <C>             <C>                <C>
Sales                                                                           $37,931         $ 36,762           $ 37,478
Cost of sales                                                                    27,155           26,329             27,164
------------------------------------------------------------------------ --------------- ---------------- ------------------
Gross profit                                                                     10,776           10,433             10,314
Selling, general and administrative expenses                                      9,064            8,747              8,641
Restructuring charges and other                                                     468
Gain on sale of New England Osco drugstores                                         (54)
Merger-related (credits) charges                                                    (15)              24                396
Litigation settlement charge                                                                                             37
------------------------------------------------------------------------ --------------- ---------------- ------------------
Operating profit                                                                  1,313            1,662              1,240
Other (expenses) income:
  Interest, net                                                                    (432)            (385)              (353)
  Other, net                                                                         (8)              (3)                12
------------------------------------------------------------------------ --------------- ---------------- ------------------
Earnings before income taxes and extraordinary item                                 873            1,274                899
Income taxes                                                                        372              509                472
------------------------------------------------------------------------ --------------- ---------------- ------------------
Earnings before extraordinary item                                                  501              765                427
Extraordinary loss on extinguishment of debt, net of tax benefit of $7                                                  (23)
------------------------------------------------------------------------ --------------- ---------------- ------------------
Net Earnings                                                                       $501            $ 765              $ 404
======================================================================== =============== ================ ==================
Basic Earnings Per Share:
  Earnings before extraordinary item                                              $1.23           $ 1.83             $ 1.01
  Extraordinary item                                                                                                   (.05)
------------------------------------------------------------------------ --------------- ---------------- ------------------
  Net Earnings                                                                    $1.23           $ 1.83             $ 0.96
======================================================================== =============== ================ ==================
Diluted Earnings Per Share:
  Earnings before extraordinary item                                             $ 1.23           $ 1.83             $ 1.00
  Extraordinary item                                                                                                   (.05)
------------------------------------------------------------------------ --------------- ---------------- ------------------
  Net Earnings                                                                   $ 1.23           $ 1.83             $ 0.95
======================================================================== =============== ================ ==================
Weighted Average Common Shares Outstanding:
  Basic                                                                             406              418                422
  Diluted                                                                           408              418                423



See Notes to Consolidated Financial Statements
</TABLE>

                                         Albertson's, Inc. 2001 Annual Report 15

<PAGE>


CONSOLIDATED
BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                           JANUARY 31,       FEBRUARY 1,
(IN MILLIONS, EXCEPT PER SHARE DATA)                                                              2002              2001
------------------------------------------------------------------------------------ ------------------ -----------------
<S>                                                                                             <C>                <C>
ASSETS
Current Assets:
   Cash and cash equivalents                                                                  $     85          $     57
   Accounts and notes receivable, net                                                              681               547
   Inventories                                                                                   3,196             3,364
   Prepaid expenses                                                                                149               154
   Assets held for sale                                                                            326               114
   Deferred income taxes                                                                           172                70
   Refundable income taxes                                                                                            36
------------------------------------------------------------------------------------ ------------------ -----------------
     Total Current Assets                                                                        4,609             4,342
Land, Buildings and Equipment, net                                                               9,282             9,558
Goodwill and Intangibles, net                                                                    1,639             1,727
Other Assets                                                                                       437               451
------------------------------------------------------------------------------------ ------------------ -----------------
Total Assets                                                                                  $ 15,967          $ 16,078
==================================================================================== ================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Accounts payable                                                                           $  2,093          $  2,163
   Salaries and related liabilities                                                                584               561
   Taxes other than income taxes                                                                   153               141
   Income taxes                                                                                     51
   Self-insurance                                                                                  198               218
   Unearned income                                                                                  88               112
   Restructuring reserves                                                                           61
   Merger-related reserves                                                                           5                13
   Current portion of capitalized lease obligations                                                 14                20
   Current maturities of long-term debt                                                            123                62
   Other                                                                                           212               105
------------------------------------------------------------------------------------ ------------------ -----------------
     Total Current Liabilities                                                                   3,582             3,395
Long-Term Debt                                                                                   5,060             5,715
Capitalized Lease Obligations                                                                      276               227
Self-Insurance                                                                                     307               216
Deferred Income Taxes                                                                               71               116
Other Long-Term Liabilities and Deferred Credits                                                   756               715
Commitments and Contingencies
Stockholders' Equity:
   Preferred stock - $1.00 par value; authorized - 10 shares; designated -
     3 shares of Series A Junior Participating; issued - none
   Common stock - $1.00 par value; authorized - 1,200 shares; issued -
     407 shares and 405 shares, respectively                                                       407               405
   Capital in excess of par                                                                         94                48
   Accumulated other comprehensive loss                                                            (19)
   Retained earnings                                                                             5,433             5,241
------------------------------------------------------------------------------------ ------------------ -----------------
Total Stockholders' Equity                                                                       5,915             5,694
------------------------------------------------------------------------------------ ------------------ -----------------
Total Liabilities and Stockholders' Equity                                                    $ 15,967          $ 16,078
==================================================================================== ================== =================



See Notes to Consolidated Financial Statements
</TABLE>


                                         Albertson's, Inc. 2001 Annual Report 16

<PAGE>


CONSOLIDATED
CASH FLOWS

<TABLE>
<CAPTION>
                                                                               52 WEEKS         52 WEEKS        53 WEEKS
                                                                            JANUARY 31,      FEBRUARY 1,     FEBRUARY 3,
(IN MILLIONS)                                                                      2002             2001            2000
------------------------------------------------------------------------ --------------- ---------------- ---------------
<S>                                                                             <C>                <C>             <C>
Cash Flows From Operating Activities:
Net earnings                                                                    $   501          $   765         $   404
Adjustments to reconcile net earnings to
net cash provided by operating activities:
   Depreciation and amortization                                                    970              944             853
   Goodwill amortization                                                             56               57              58
   Noncash merger-related (credits) charges                                         (13)              21             272
   Restructuring and other noncash charges                                          442
   Gain on sale of New England Osco drugstores                                      (54)
   Loss (gain) on asset sales                                                        22               (4)             (2)
   Net deferred income taxes and other                                             (106)              14             (53)
   Decrease (increase) in cash surrender value of company-owned life
     insurance                                                                       17                4             (12)
   Changes in operating assets and liabilities:
     Receivables and prepaid expenses                                              (104)               3              46
     Inventories                                                                    119              118            (233)
     Accounts payable                                                               (70)             (12)             (9)
     Other current liabilities                                                      287             (175)            108
     Self-insurance                                                                  71               24             (79)
     Unearned income                                                                  3               19              76
     Other long-term liabilities                                                    (49)              13             (11)
------------------------------------------------------------------------ --------------- ---------------- ---------------
       Net cash provided by operating activities                                  2,092            1,791           1,418
------------------------------------------------------------------------ --------------- ---------------- ---------------
Cash Flows From Investing Activities:
   Capital expenditures                                                          (1,487)          (1,771)         (1,837)
   Proceeds from disposal of land, buildings and equipment                          288              189              83
   Decrease (increase) in other assets                                               40               33            (122)
   Proceeds from divestitures and duplicate assets                                                                   393
------------------------------------------------------------------------ --------------- ---------------- ---------------
       Net cash used in investing activities                                     (1,159)          (1,549)         (1,483)
------------------------------------------------------------------------ --------------- ---------------- ---------------
Cash Flows From Financing Activities:
   Proceeds from long-term borrowings                                               623            1,222           1,841
   Payments on long-term borrowings                                                 (89)            (417)           (970)
   Net commercial paper activity and bank borrowings                             (1,153)            (475)           (430)
   Proceeds from stock options exercised                                             23                6              32
   Cash dividends paid                                                             (309)            (315)           (265)
   Stock purchases and retirements                                                                  (451)
   Tax payments for options exercised                                                                                (14)
------------------------------------------------------------------------ --------------- ---------------- ---------------
       Net cash (used in) provided by financing activities                         (905)            (430)            194
------------------------------------------------------------------------ --------------- ---------------- ---------------
Net Increase (Decrease) in Cash and Cash Equivalents                                 28             (188)            129
------------------------------------------------------------------------ --------------- ---------------- ---------------
Cash and Cash Equivalents at Beginning of Year                                       57              245             116
------------------------------------------------------------------------ --------------- ---------------- ---------------
Cash and Cash Equivalents at End of Year                                        $    85          $    57         $   245
======================================================================== =============== ================ ===============



See Notes to Consolidated Financial Statements
</TABLE>

                                         Albertson's, Inc. 2001 Annual Report 17

<PAGE>


CONSOLIDATED
STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                     ACCUMULATED
                                                      CAPITAL IN           OTHER                              TOTAL
                                      COMMON STOCK        EXCESS   COMPREHENSIVE  RETAINED  TREASURY   STOCKHOLDER'S  COMPREHENSIVE
(DOLLARS IN MILLIONS)              $1.00 PAR VALUE  OF PAR VALUE   (LOSS) INCOME  EARNINGS     STOCK         EQUITY          INCOME
------------------------------------------------------------------------------------------------------------------------------------

<S>                <C> <C>                   <C>          <C>              <C>      <C>          <C>         <C>               <C>
Balance at January 28, 1999                  $ 435        $ 579            $  -     $ 5,027      $(519)      $ 5,522           $801
                                                                                                                               ====
Net earnings                                                                            404                      404           $404
Issuance of 131,099 shares of
  stock for stock options and
  awards                                                     (1)                                     4             3
Merger-related stock option charge                           47                                                   47
Exercise of stock options,
  including tax benefits                         1           30                                                   31
Treasury and fractional share
  retirements                                  (14)        (496)                                   510             -
Shares issued for limited stock
  appreciation rights                            2          (16)                                                 (14)
Stock purchase incentive plan                                 2                                      5             7
Dividends                                                                              (298)                    (298)
----------------------------------- --------------- ------------ ---------------- ---------- ---------- ------------- --------------
Balance at February 3, 2000                    424          145               -       5,133         -          5,702           $404
                                                                                                                               ====
Net earnings                                                                            765                      765           $765
Deferred tax adjustment related to
  stock options                                             (12)                                                 (12)
Exercise of stock options,
  including tax benefits                                      6                                                    6
Stock purchases and retirements -
  18,659,200 shares                            (19)         (92)                       (340)                    (451)
Deferred stock unit plan                                      1                                                    1
Dividends                                                                              (317)                    (317)
----------------------------------- --------------- ------------ ---------------- ---------- ---------- ------------- --------------
Balance at February 1, 2001                    405           48               -       5,241         -          5,694           $765
                                                                                                                               ====
Net earnings                                                                            501                      501           $501
Exercise of stock options,
  including tax benefits                         2           26                                                   28
Deferred stock unit plan                                     19                                                   19
Directors' stock plan                                         1                                                    1
Dividends                                                                              (309)                    (309)
Minimum pension liability,
  adjustment (net of tax of $16)                                            (23)                                 (23)           (23)
Interest rate locks:
  Cumulative effect of adoption of
     new accounting principle (net
     of tax of $3)                                                            5                                    5              5
  Loss on settled contracts (net
     of tax of $1)                                                           (1)                                  (1)            (1)
----------------------------------- --------------- ------------ ---------------- ---------- ---------- ------------- --------------
Balance at January 31, 2002                  $ 407         $ 94            $(19)    $ 5,433     $   -        $ 5,915           $482
=================================== =============== ============ ================ ========== ========== ============= ==============



See Notes to Consolidated Financial Statements
</TABLE>


                                         Albertson's, Inc. 2001 Annual Report 18

<PAGE>


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

(dollars in millions, except per share data)

Business Description and Basis of Presentation

Albertson's, Inc. (the "Company") is incorporated under the laws of the State of
Delaware and is the successor to a business  founded by J.A.  Albertson in 1939.
On June  23,  1999,  Albertson's,  Inc.  ("Albertson's"  or the  "Company")  and
American  Stores  Company  ("ASC")  consummated  a merger.  Based on sales,  the
Company is one of the largest  retail  food and drug chains in the world.  As of
January 31, 2002, the Company  operated 2,421 stores in 33 Western,  Midwestern,
Eastern and Southern states. Retail operations are supported by 19 major Company
distribution  operations,  strategically  located  in  the  Company's  operating
markets.

The  consolidated  financial  statements  have been prepared in accordance  with
accounting  principles  generally  accepted in the United  States of America and
include  all  entities  in  which  the  Company  has  control,   including   its
majority-owned subsidiaries. All material intercompany transactions and balances
have been eliminated.


Summary of Significant Accounting Policies

FISCAL YEAR END The Company's fiscal year is generally 52 weeks and periodically
consists of 53 weeks  because the fiscal  year ends on the  Thursday  nearest to
January 31. Unless the context otherwise  indicates,  reference to a fiscal year
of the Company refers to the calendar year in which such fiscal year commences.

USE OF ESTIMATES   The  preparation  of  the  Company's  consolidated  financial
statements,  in conformity with accounting  principles generally accepted in the
United States of America, requires management to make estimates and assumptions.
Some of these estimates require  difficult,  subjective and/or complex judgments
about matters that are  inherently  uncertain,  and as a result,  actual results
could differ from these  estimates.  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.

SEGMENT INFORMATION  The Company  operates  retail food  and drug stores.  These
operations are within a single  operating  segment and all are within the United
States.

DERIVATIVES   From time to time,  the Company  enters  into  certain  derivative
transactions  allowed by the Company's risk management  policy. The Company does
not enter into  derivative  financial  instruments  for  trading  purposes.  The
Company uses derivatives primarily as cash flow hedges to set interest rates for
forecasted debt issuances, such as interest rate locks. These contracts are with
major financial institutions and are very short-term in nature. The gain or loss
on interest rate locks is deferred in other comprehensive  income and recognized
over the life of the  related  debt  instrument  as an  adjustment  to  interest
expense.

RECLASSIFICATIONS  Certain  reclassifications  have  been  made in prior  years'
financial statements to conform to classifications used in the current year.

CASH AND CASH EQUIVALENTS   The Company considers all highly liquid  investments
with a  maturity  of three  months  or less at the time of  purchase  to be cash
equivalents.

INVENTORIES    The Company  values  inventories  at the lower of cost or market.
Cost of  substantially  all  inventories  is determined on a last-in,  first-out
(LIFO) basis.


                                         Albertson's, Inc. 2001 Annual Report 19

<PAGE>


CAPITALIZATION, DEPRECIATION AND AMORTIZATION  Land, buildings and equipment are
recorded at cost.  Depreciation is provided on the straight-line method over the
estimated  useful life of the asset.  Estimated  useful  lives are  generally as
follows:  buildings and improvements-10 to 35 years; fixtures and equipment-3 to
10  years;  software-3  to 5  years;  leasehold  improvements-10  to  25  years;
intangibles-3 to 10 years; and capitalized leases-20 to 30 years.

The costs of major  remodeling and improvements on leased stores are capitalized
as  leasehold   improvements.   Leasehold  improvements  are  amortized  on  the
straight-line method over the shorter of the life of the applicable lease or the
useful life of the asset.  Assets under capital leases are recorded at the lower
of the fair  market  value of the asset or the present  value of future  minimum
lease  payments.  These leases are  amortized on the  straight-line  method over
their primary term.

Beneficial  lease rights and lease  liabilities are recorded on purchased leases
based on  differences  between  contractual  rents  under the  respective  lease
agreements  and  prevailing  market rents at the date of the  acquisition of the
lease.  Beneficial  lease rights and lease  liabilities  are amortized  over the
lease term using the straight-line method.

GOODWILL  Goodwill resulting from business acquisitions represents the excess of
cost over fair value of net assets acquired and is being amortized over 40 years
using the  straight-line  method.  The practice of  amortizing  goodwill will be
discontinued  in  Fiscal  2002  with the  adoption  of  Statement  of  Financial
Accounting  Standards  ("SFAS")  No. 142 (see  "Recent  Accounting  Standards").
Goodwill is  principally  from the  acquisition  of Lucky Stores,  Inc. in 1988.
Accumulated   amortization   amounted  to  $708  and  $660  in  2001  and  2000,
respectively.

COMPANY-OWNED LIFE INSURANCE  The Company has purchased life insurance  policies
to cover its obligations under certain deferred compensation plans for officers,
key  employees  and  directors.  Cash  surrender  values of these  policies  are
adjusted for  fluctuations  in the market value of underlying  investments.  The
cash surrender  value is adjusted each reporting  period and any gain or loss is
included with other income (expense) in the Company's Consolidated Earnings.

IMPAIRMENT OF LONG-LIVED ASSETS AND CLOSED STORE RESERVES  The Company accounted
for the  impairment  of long-lived  assets in accordance  with SFAS No. 121 and,
beginning  in 2002,  will  account for it in  accordance  with SFAS No. 144. For
assets to be held and used, the Company tests for impairment using  undiscounted
cash flows and calculates the amount of impairment  using discounted cash flows.
For  assets  held for sale,  impairment  is  recognized  based on the  excess of
remaining  book value over expected  recovery  value.  The recovery value is the
fair  value as  determined  by  independent  quotes  or  expected  sales  prices
developed by internal specialists.

For  properties  to be closed that are under  long-term  lease  agreements,  the
present  value of any  remaining  liability  under the lease,  discounted  using
risk-free  rates and net of  expected  sublease  recovery,  is  recognized  as a
liability and expensed.

SELF-INSURANCE The Company is primarily self-insured for property loss, workers'
compensation  and  general  liability  costs.   Self-insurance  liabilities  are
determined  actuarially  based on claims filed and estimates for claims incurred
but not reported. The majority of these liabilities are not discounted.

DEFERRED RENT   The Company  recognizes rent holidays and rent  escalations on a
straight-line  basis over the term of the lease.  The  deferred  rent  amount is
included in other long-term  liabilities  and deferred  credits on the Company's
Consolidated Balance Sheets.

REVENUE RECOGNITION Revenue is recognized at the point of sale for retail sales.
Vendor   allowances  and  credits  that  relate  to  the  Company's  buying  and
merchandising  activities  are recorded in cost of sales and are  recognized  as
earned according to the underlying agreement.  Two forms of agreement exist, one
based on volume and the other based on time. Vendor allowances consist primarily
of  promotional  allowances,  advertising  allowances  and, to a lesser  extent,
slotting  allowances.  The Company  utilizes  vendor  allowances to fund pricing
promotions,  advertising  expense and slotting  expense.  The discount earned by
customers by using their preferred  loyalty card is recorded by the Company as a
reduction to sales price.  The only income  recognized  from any in-store rental
arrangement is the lease amount received based on space occupied.

STORE OPENING COSTS   Noncapital expenditures  incurred in opening new stores or
remodeling existing stores are expensed in the year in which they are incurred.


                                         Albertson's, Inc. 2001 Annual Report 20

<PAGE>


ADVERTISING   Advertising  costs incurred to produce media advertising for major
new  campaigns  are  expensed in the year in which the  advertising  first takes
place.   Other  advertising  costs  are  expensed  when  incurred.   Cooperative
advertising credits from vendors are recorded in the period in which the related
expense  is  incurred.  Gross  advertising  expenses  of $537,  $550  and  $654,
excluding  cooperative  advertising  money received from vendors,  were included
with cost of sales in the  Company's  Consolidated  Earnings for 2001,  2000 and
1999, respectively.

STOCK-BASED COMPENSATION     SFAS   No.   123,   "Accounting   for   Stock-Based
Compensation,"   encourages,   but  does  not   require,   companies  to  record
compensation cost for stock-based employee compensation plans at fair value. The
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion ("APB")
No. 25, "Accounting for Stock Issued to Employees," and related Interpretations.
Accordingly,  compensation  cost of stock-based  compensation is measured as the
excess, if any, of the quoted market price of the Company's stock at the date of
the grant over the option  exercise price and is charged to operations  over the
vesting period.  Income tax benefits attributable to stock options exercised are
credited to capital in excess of par value.

INCOME TAXES   The Company provides for deferred income taxes during the year in
accordance with SFAS No. 109.  Deferred  income taxes  represent  future net tax
effects resulting from temporary differences between the financial statement and
tax basis of assets and  liabilities  using  enacted tax rates in effect for the
year in which the differences are expected to be settled or realized.  The major
temporary  differences and their net effect are shown in the "Income Taxes" note
to the Consolidated Financial Statements.

EARNINGS PER SHARE (EPS)  Basic EPS is  computed  by dividing  consolidated  net
earnings by the weighted  average number of common shares  outstanding.  Diluted
EPS is computed by dividing consolidated net earnings by the sum of the weighted
average number of common shares  outstanding and the weighted  average number of
potential common shares  outstanding.  Potential common shares consist primarily
of outstanding options under the Company's stock option plans.

COMPREHENSIVE INCOME The Company reports comprehensive income in accordance with
SFAS No. 130, "Reporting  Comprehensive  Income." Comprehensive income refers to
revenues,  expenses,  gains and losses that are not included in net earnings but
rather are recorded  directly in  stockholders'  equity.  Items of comprehensive
income other than net earnings were insignificant in 2000 and 1999.


Closed Store Reserves

When executive management approves and commits to closing or relocating a store,
the  transaction is accounted for in accordance  with the Company's  policy (see
"Summary of Significant  Accounting  Policies").  The following  table shows the
pre-tax  expense,  and related  reserves,  for closed  stores and other  surplus
property:


<TABLE>
<CAPTION>
                                                          LEASE              ASSET
                                                    LIABILITIES        IMPAIRMENTS             TOTAL
--------------------------------------------- ------------------ ------------------ -----------------
<S>                <C> <C>                                 <C>               <C>                <C>
Balance at January 29, 1999                                $ 23              $   -              $ 23
--------------------------------------------- ------------------ ------------------ -----------------
         Additions                                            5                  6                11
         Adjustments                                          1                 (2)               (1)
         Utilization                                         (4)                (4)               (8)
--------------------------------------------- ------------------ ------------------ -----------------
Balance at February 3, 2000                                  25                  -                25
--------------------------------------------- ------------------ ------------------ -----------------
         Additions                                            7                 40                47
         Adjustments                                         (2)                                  (2)
         Utilization                                         (8)               (40)              (48)
--------------------------------------------- ------------------ ------------------ -----------------
Balance at February 1, 2001                                  22                  -                22
--------------------------------------------- ------------------ ------------------ -----------------
         Additions                                            4                 16                20
         Adjustments                                         (2)                (2)               (4)
         Adjustments - Restructuring                         23                 28                51
         Utilization                                         (8)               (42)              (50)
--------------------------------------------- ------------------ ------------------ -----------------
Balance at January 31, 2002                                $ 39              $   -              $ 39
============================================= ================== ================== =================
</TABLE>



                                         Albertson's, Inc. 2001 Annual Report 21

<PAGE>


The restructuring  plan (discussed in "Restructuring  Plan") included actions to
accelerate  the disposal of surplus  property that included  terminating  leases
through negotiated  buyouts and selling owned properties  through auctions.  The
$51 pre-tax restructuring  adjustments are the additional charges expected to be
incurred as a result of these  actions.  These  charges are included in selling,
general and administrative  expenses in the Company's Consolidated Earnings. $30
of the reserve balance as of January 31, 2002 is included with accounts  payable
and the remaining $9 is included with other  liabilities and deferred credits in
the Company's  Consolidated  Balance  Sheets.  For the period ended  February 1,
2001,  $5 of the reserve  balance was included  with  accounts  payable with the
remaining $17 included with other liabilities and deferred credits.  The related
assets are  recorded at their  estimated  fair value,  less selling  costs,  and
reported as assets held for sale in the Company's Consolidated Balance Sheets.

Restructuring Plan

On July 17, 2001, the Company's Board of Directors approved a restructuring plan
designed   to   improve   future   financial   results   and  to  drive   future
competitiveness.  The plan includes certain exit costs and employee  termination
benefits,  as described below,  that will be incurred within  approximately  one
year of the Board approval date.
<TABLE>
<CAPTION>
         ACTION                                                        STATUS
         ------                                                        ------
<S>     <C>                                                            <C>
         Reduction in administrative and corporate overhead            Substantially complete
         Closing of 165 underperforming retail stores                  80 closed as of year end
         Consolidation and elimination of four division offices        Completed
         Process streamlining                                          Ongoing
</TABLE>

As a result of the  restructuring  plan, the Company recorded pre-tax charges of
$509 ($314 after tax or $0.77 per diluted  share) made up of $468  restructuring
and  other  and $41 of  period  costs  (including  $35 of  inventory  write-down
recorded  in cost of  sales)  for the 52  weeks  ended  January  31,  2002.  The
following  table  presents  the  pre-tax   charges,   incurred  by  category  of
expenditure,   and  related  restructuring  reserve  accruals  included  in  the
Company's Consolidated Balance Sheets:
<TABLE>
<CAPTION>
                                   EMPLOYEE                         LEASE
                                  SEVERANCE          ASSET    TERMINATION
                                      COSTS    IMPAIRMENTS          COSTS      OTHER      TOTAL
                                ------------ -------------- -------------- ---------- ----------
<S>                                    <C>           <C>             <C>        <C>        <C>
Additions                              $ 44          $ 396           $ 57       $ 12       $509
Utilization                              33            396              7         12        448
                                ------------ -------------- -------------- ---------- ----------
Balance at January 31, 2002            $ 11          $   -           $ 50       $  -       $ 61
                                ============ ============== ============== ========== ==========
</TABLE>

Employee  severance  costs consist of severance  pay,  health care  continuation
costs,  and  outplacement  service costs for employees who  participated  in the
Company's  Voluntary  Separation  Plan and for employees who were  terminated or
notified of  termination  under the  Company's  Involuntary  Severance  Plan. In
accordance with the  restructuring  plan,  1,341  managerial and  administrative
positions  above  store  level  have  been  identified  for  termination.  As of
January 31, 2002, 995 positions have been terminated.

As part of the Company's  restructuring plan, all stores were reviewed utilizing
a methodology  based on return on invested  capital.  Based on this review,  the
Company identified and committed to close and dispose 165 underperforming stores
in 25  states.  All stores  identified  for  closure  were  evaluated  for lease
liability  or asset  impairment,  including  goodwill,  in  accordance  with the
Company's  policy (see  "Summary of  Significant  Accounting  Policies").  As of
January 31, 2002, 80 stores have been closed.

Assets  to  be  disposed  of  include  land,  buildings,   equipment,  leasehold
improvements and inventory for stores and division offices that were included in
the restructuring  discussed above. These assets are recorded at their estimated
fair value,  less  selling  costs,  and  reported as assets held for sale in the
Company's Consolidated Balance Sheets.

Other costs include various expenses  related to the Company's  decision to exit
certain insignificant businesses and the consolidation of the division offices.

Merger, Divestitures and Related Costs

On June 23, 1999,  Albertson's,  Inc. and American Stores Company  consummated a
merger with the issuance of 177 million shares of Albertson's  common stock (the
"Merger").  The  Merger  constituted  a  tax-free  reorganization  and has  been
accounted for as a pooling of interests for accounting  and financial  reporting
purposes.

                                         Albertson's, Inc. 2001 Annual Report 22
<PAGE>


Results of operations  include $6 of  merger-related  credits ($4 after tax) for
fiscal year 2001, $151 of merger-related charges ($93 after tax) for fiscal year
2000, and $683 of merger-related  charges ($529 after tax) for fiscal year 1999.
The following table presents the pre-tax charges (credits)  incurred by category
of  expenditure   and   merger-related   accruals   included  in  the  Company's
Consolidated Balance Sheets:

<TABLE>
<CAPTION>
                                             ASSET                     INTEGRATION
                                       IMPAIRMENTS      SEVERANCE        AND OTHER          TOTAL
                                  ----------------- -------------- ---------------- --------------
<S>                                          <C>            <C>              <C>            <C>
Additions                                    $ 264          $ 124            $ 343          $ 731
Adjustments                                    (22)            (7)             (19)           (48)
Utilization                                   (242)           (93)            (315)          (650)
                                  ----------------- -------------- ---------------- --------------
Balance at February 3, 2000                      -             24                9             33
Additions                                       36             21               97            154
Adjustments                                                    (3)                             (3)
Utilization                                    (36)           (35)            (100)          (171)
                                  ----------------- -------------- ---------------- --------------
Balance at February 1, 2001                      -              7                6             13
Additions                                        8              2                5             15
Adjustments                                    (20)            (1)              (1)           (22)
Utilization                                     12             (3)             (10)            (1)
                                  ----------------- -------------- ---------------- --------------
Balance at January 31, 2002                  $   -          $   5            $   -          $   5
                                  ================= ============== ================ ==============
</TABLE>

Asset  impairments  include  the loss on  disposal of  duplicate  and  abandoned
facilities,   including  administrative  offices,  intangibles  and  information
technology  equipment  which were  abandoned by the Company.  Operations for the
year ended January 31, 2002, included $15 of pre-tax credits associated with the
reversal  of previous  impairment  charges  related to the sale of the  American
Stores' Tower in Salt Lake City,  Utah.  The Company  closed on the sale of this
property on May 15, 2001, thus completing the asset dispositions  resulting from
the Merger.

Severance  consists of retention  costs for certain  individuals and termination
benefit liabilities for 633 individuals who have already been terminated.

Integration  and other costs consist  primarily of  incremental  transition  and
integration  costs associated with integrating the operations of Albertson's and
ASC and are being expensed as incurred. These include such costs as advertising,
labor associated with system conversions and training and relocation costs. Also
included  are  transaction  and  financing  costs  which  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.

As discussed in the "Stock Options and Stock Awards" note, the Company  recorded
net pre-tax  charges  through  the first two  quarters of 1999 of $47 related to
Limited Stock Appreciation  Rights ("LSARs").  These charges are included in the
integration and other category above. The actual change of control price used to
measure the value of these exercised  LSARs became  determinable at the date the
Merger was consummated.

The  costs  of  integrating  the two  companies  have  resulted  in  significant
nonrecurring  charges and  incremental  expenses.  These costs had a significant
effect on both 2000 and 1999 results of operations of the Company.  Nonrecurring
charges  and  expenses  of  implementing  integration  actions  were  originally
estimated to total $700,  after income tax benefits.  On an after-tax basis, and
subsequent   to  first   quarter   1999,   the  Company  has  incurred  $634  of
merger-related costs and does not expect to exceed its original estimate.

Supplemental Cash Flow Information

Selected cash payments and noncash activities were as follows:
<TABLE>
<CAPTION>
                                                                             2001           2000         1999
-------------------------------------------------------------------- ------------- -------------- ------------
<S>                                                                         <C>            <C>          <C>
Cash payments for income taxes                                              $ 403          $ 549        $ 520
Cash payments for interest, net of amounts capitalized                        296            373          413
Noncash investing and financing activities:
  Capitalized lease obligations incurred                                       79             62           24
  Capitalized lease obligations terminated                                     19              6           14
  Deferred stock units                                                         19              1
  Tax benefits related to stock options                                         4              1           11
  Deferred tax adjustment - related to stock options                            3             12
  Liabilities assumed in connection with asset acquisitions                                                 7
</TABLE>

                                         Albertson's, Inc. 2001 Annual Report 23

<PAGE>


Store Dispositions

During  January 2002 the Company sold 80 New England  Osco  drugstores  for $235
million in a transaction that resulted in a $54 pre-tax one-time gain.


Accounts and Notes Receivable

Accounts and notes receivable, net, consisted of the following:
<TABLE>
<CAPTION>
                                                                    JANUARY 31,     FEBRUARY 1,
                                                                           2002            2001
----------------------------------------------------------------- -------------- ---------------
<S>                                                                       <C>             <C>
Trade and other accounts receivable                                       $ 685           $ 578
Current portion of notes receivable                                          40               7
Allowance for doubtful accounts                                             (44)            (38)
----------------------------------------------------------------- -------------- ---------------
                                                                          $ 681           $ 547
================================================================= ============== ===============
</TABLE>


Inventories

Approximately  97% of the  Company's  inventories  are valued using the last-in,
first-out (LIFO) method. If the first-in, first-out (FIFO) method had been used,
inventories  would  have been $597 and $591  higher at the end of 2001 and 2000,
respectively.  Net  earnings  (basic and diluted  earnings per share) would have
been higher by $3 ($0.01) in 2001,  lower by $14 ($0.03) in 2000,  and higher by
$18  ($0.04)  in  1999.  The  replacement  cost of  inventories  valued  at LIFO
approximates FIFO cost.

During  2001 and 2000,  inventory  quantities  were  reduced.  These  reductions
resulted in a liquidation  of LIFO inventory  quantities  carried at lower costs
prevailing in prior years as compared with the cost of 2001 and 2000  purchases.
As a result,  cost of sales was  decreased by $10 in 2001 and $26 in 2000.  This
increased net earnings  (basic and diluted  earnings per share) by $6 ($0.01) in
2001 and $15 ($0.04) in 2000.


Land, Buildings and Equipment

Land, buildings and equipment, net, consisted of the following:
<TABLE>
<CAPTION>
                                                                    JANUARY 31,     FEBRUARY 1,
                                                                           2002            2001
----------------------------------------------------------------- -------------- ---------------
<S>                                                                     <C>             <C>
Land                                                                    $ 2,105         $ 2,169
Buildings                                                                 5,598           5,418
Fixtures and equipment                                                    5,471           5,491
Leasehold improvements                                                    1,535           1,548
Capitalized leases                                                          326             314
----------------------------------------------------------------- -------------- ---------------
                                                                         15,035          14,940
Accumulated depreciation and amortization                                (5,753)         (5,382)
----------------------------------------------------------------- -------------- ---------------
                                                                        $ 9,282         $ 9,558
================================================================= ============== ===============
</TABLE>


Goodwill and Intangibles

Goodwill and intangibles, net, consisted of the following:
<TABLE>
<CAPTION>
                                                                    JANUARY 31,     FEBRUARY 1,
                                                                           2002            2001
----------------------------------------------------------------- -------------- ---------------
<S>                                                                     <C>             <C>
Goodwill                                                                $ 2,176         $ 2,220
Intangible assets                                                           346             320
----------------------------------------------------------------- -------------- ---------------
                                                                          2,522           2,540
Accumulated amortization                                                   (883)           (813)
----------------------------------------------------------------- -------------- ---------------
                                                                        $ 1,639         $ 1,727
================================================================= ============== ===============
</TABLE>


                                         Albertson's, Inc. 2001 Annual Report 24

<PAGE>


Indebtedness

Long-term debt consisted of the following (borrowings are unsecured unless
indicated):


<TABLE>
<CAPTION>
                                                                                         JANUARY 31,     FEBRUARY 1,
                                                                                                2002            2001
-------------------------------------------------------------------------------------- -------------- ---------------
<S>                                                                                           <C>            <C>
2001 Shelf Registration:
   8.0% Debentures due May 1, 2031                                                            $  400
   7.25% Notes due May 1, 2013                                                                   200
1999 Shelf Registration:
   7.5% Notes due February 15, 2011                                                              700          $  700
   8.35% Notes due May 1, 2010                                                                   275             275
   8.7% Debentures due May 1, 2030                                                               225             225
   7.45% Debentures due August 1, 2029                                                           650             650
   6.95% Notes due August 1, 2009                                                                350             350
   6.55% Notes due August 1, 2004                                                                300             300
Prior Authorizations:
   Medium-term notes, due 2013 through 2028, average interest rate of 6.5%                       317             317
   Medium-term notes, due 2007 through 2027, average interest rate of 6.8%                       200             200
   7.75% Debentures due June 15, 2026                                                            200             200
   7.5% Debentures due May 1, 2037                                                               200             200
   8.0% Debentures due June 1, 2026                                                              272             272
   7.9% Debentures due May 1, 2017                                                                95              95
   7.4% Notes due May 15, 2005                                                                   200             200
   Medium-term notes, due 2003 through 2028, average interest rate of 7.0%                       245             245
   9.125% Notes due April 1, 2002                                                                 80              80
Other Long-Term Debt:
   Notes due July 3, 2004, average interest rates of 6.7% and 6.5%, respectively                 200             200
   Industrial revenue bonds, average interest rate of 6.1%                                        11              11
   Secured mortgage notes and other notes payable, average interest rates of 11.0%
     and 9.4%, respectively                                                                       63             104
   Commercial paper and bank lines of credit                                                                   1,153
-------------------------------------------------------------------------------------- -------------- ---------------
                                                                                               5,183           5,777
Current maturities                                                                              (123)            (62)
-------------------------------------------------------------------------------------- -------------- ---------------
                                                                                              $5,060          $5,715
====================================================================================== ============== ===============
</TABLE>

As of January 31, 2002, there were no outstanding  commercial paper  borrowings.
The  Company  has  established  the  necessary  credit  facilities,  through its
revolving credit agreements,  to refinance outstanding commercial paper and bank
line borrowings on a long-term basis.  Outstanding  borrowings are classified as
noncurrent  because it is the Company's intent to refinance these obligations on
a long-term basis. The effective  interest rate for these borrowings  during the
fiscal year ended January 31, 2002 was 5.04%.

In support of the  Company's  commercial  paper  program,  the Company had three
credit  facilities  totaling  $1,750 during Fiscal 2001. The first agreement for
$100 expired in February 2002 and was renewed for an  additional  year to expire
in February  2003.  The second  agreement for $700 expired in March 2002 and was
replaced,  based on the Company's  revised  liquidity  requirements,  by a $350,
364-day credit  agreement.  The third  agreement for $950 expires in March 2005.
All of the credit  agreements  contain an option  which would allow the Company,
upon due notice,  to convert any outstanding  amounts at the expiration dates to
term loans. The agreements in place at year end also contain certain  covenants,
the most  restrictive  of which  requires  the Company to maintain  consolidated
tangible net worth, as defined,  of at least $2,100. As of January 31, 2002, the
Company's consolidated tangible net worth, as defined, was approximately $4,200.
Upon the  execution of the $350,  364-day  credit  agreement,  the  consolidated
tangible net worth threshold increased to $3,000, and an additional covenant was
added requiring a fixed charge coverage of at least 2.7 times. As defined in the
new  agreement,  the  fixed  charge  coverage  ratio  based  on 2001 results was
4.2 times.  No  borrowings were  outstanding  under the  credit facilities as of
January 31, 2002, or February 1, 2001.

Albertson's  filed  a shelf  registration  statement  with  the  Securities  and
Exchange  Commission  (SEC),  which became effective on February 13, 2001 ("2001
Registration  Statement")  to  authorize  the  issuance  of up to $3,000 in debt
securities.  In May 2001 the  Company  issued  $600 of term notes under the 2001
Registration  Statement.  The notes are  composed of $200 of  principal  bearing
interest at 7.25% due May 1, 2013 and $400 of principal bearing interest at 8.0%
due May 1, 2031.  Proceeds  were used  primarily to repay  borrowings  under the
Company's commercial paper program.


                                         Albertson's, Inc. 2001 Annual Report 25

<PAGE>


Albertson's  filed a shelf  registration  statement  with the SEC,  which became
effective in February 1999 (the "1999 Registration Statement"), to authorize the
issuance of up to $2,500 in debt securities.  In January 2001 the Company issued
the  remaining  $700  of  term  notes  available  under  the  1999  Registration
Statement.  The $700 principal  bears interest at 7.5% and matures  February 15,
2011.  In May  2000  the  Company  issued  $500 of term  notes  under  the  1999
Registration  Statement.  The notes are  composed of $275 of  principal  bearing
interest at 8.35% due May 1, 2010,  and $225 of  principal  bearing  interest at
8.7% due May 1, 2030. In July 1999 the Company issued $1,300 of term notes under
the 1999  Registration  Statement.  The notes are  composed of $300 of principal
bearing interest at 6.55% due August 1, 2004; $350 of principal bearing interest
at 6.95% due August 1, 2009; and $650 of principal bearing interest at 7.45% due
August 1, 2029. For all issues, proceeds were used primarily to repay borrowings
under the Company's commercial paper program.

In July 1999 the Company  negotiated an amendment to a $200 term loan  agreement
between ASC and a group of commercial  banks.  The amended loans carry  interest
based  upon a  pricing  schedule  (which  averages  6.70%)  dependent  upon  the
Company's long-term debt rating, and mature July 3, 2004.

The  Company  has pledged  real  estate  with a cost of $151 as  collateral  for
mortgage  notes which are payable on various  schedules,  including  interest at
rates ranging from 6.8% to 16.5%. The notes mature from 2002 to 2019.

Medium-term  notes of $30 due July 2027 contain a put option which would require
the  Company to repay the notes in July 2007 if the holder of the note so elects
by giving the Company a 60-day notice.  Medium-term  notes of $50 due April 2028
contain a put option which would require the Company to repay the notes in April
2008 if the holder of the note so elects by giving the Company a 60-day notice.

The $200 of 7.5% debentures due 2037 contain a put option which will require the
Company to repay the note in 2009 if the holder of the notes so elects by giving
the Company a 60-day notice.

Following the merger with ASC the Company 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,
certain debt was extinguished during 1999.

Net interest expense was as follows:

<TABLE>
<CAPTION>
                                                             2001         2000          1999
----------------------------------------------------- ------------ ------------ -------------
<S>                                                         <C>          <C>           <C>
Debt                                                        $ 408        $ 366         $ 350
Capitalized leases                                             30           27            27
Capitalized interest                                          (23)         (21)          (26)
----------------------------------------------------- ------------ ------------ -------------
Interest expense                                              415          372           351
Bank service charges, net of interest income                   17           13             2
----------------------------------------------------- ------------ ------------ -------------
                                                            $ 432        $ 385         $ 353
===================================================== ============ ============ =============
</TABLE>

The scheduled aggregate  maturities of debt outstanding at January 31, 2002, are
summarized as follows:  $123 in 2002,  $106 in 2003, $504 in 2004, $202 in 2005,
$3 in 2006 and $4,245 thereafter.


Capital Stock

On December 2, 1996, the Board of Directors  adopted a stockholder  rights plan,
which was  amended  on August 2,  1998,  and  March 16,  1999,  under  which all
stockholders  receive one right for each share of common stock held.  Each right
will  entitle  the  holder  to  purchase,   under  certain  circumstances,   one
one-thousandth of a share of Series A Junior Participating  Preferred Stock, par
value $1.00 per share, of the Company (the "preferred  stock") at a price of 160
dollars.  Subject to certain exceptions,  the rights will become exercisable for
shares  of  preferred  stock 10  business  days (or  such  later  date as may be
determined by the Board of Directors)  following  the  commencement  of a tender
offer or  exchange  offer  that would  result in a person or group  beneficially
owning 15% or more of the outstanding shares of common stock.


                                         Albertson's, Inc. 2001 Annual Report 26

<PAGE>


Under the plan, subject to certain exceptions, if any person or group as defined
by the plan  becomes  the  beneficial  owner  of 15% or more of the  outstanding
common stock or takes  certain other  actions,  each right will then entitle its
holder as defined by the plan, other than such person or group,  upon payment of
the 160  dollars  exercise  price,  to  purchase  common  stock (or,  in certain
circumstances,  cash,  property or other securities of the Company) with a value
equal to twice the  exercise  price.  The rights may be redeemed by the Board of
Directors  at a price of  $0.001  per right  under  certain  circumstances.  The
rights, which do not vote and are not entitled to dividends,  will expire at the
close of business on March 21, 2007,  unless earlier redeemed or extended by the
Board of Directors of the Company.  In connection with the Merger,  no person or
group became the beneficial owner of 15% or more of the common stock.

The Board of Directors adopted a program on April 25, 2000, authorizing, but not
requiring, the Company to purchase and retire up to $500 of the Company's common
stock.  This  program  was  increased  by an  additional  $1,000 by the Board of
Directors  on  December  6, 2000,  for a total of $1,500.  The  revised  program
enabled the Company to purchase  stock from April 25, 2000  through  December 6,
2001.  During Fiscal 2000 the Company  purchased and retired 18.7 million shares
at a total cost of $451 or an average price of $24.15 per share.  On December 3,
2001, the Board of Directors adopted a program  authorizing,  but not requiring,
the Company to purchase and retire up to $500 of the Company's common stock from
December 6, 2001  through  December 31, 2002.  No shares were  purchased  during
Fiscal 2001.

Income Taxes

Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
                                                                       JANUARY 31,     FEBRUARY 1,
                                                                              2002            2001
-------------------------------------------------------------------- -------------- ---------------
<S>                                                                         <C>               <C>
Deferred tax assets (no valuation allowance considered necessary):
   Basis in fixed assets                                                    $  264            $157
   Self-insurance                                                              188             162
   Compensation and benefits                                                   264             238
   Unearned income                                                              18              22
   Other, net                                                                   91             128
-------------------------------------------------------------------- -------------- ---------------
     Total deferred tax assets                                                 825             707
-------------------------------------------------------------------- -------------- ---------------
Deferred tax liabilities:
   Basis in fixed assets and capitalized leases                               (515)           (584)
   Inventories                                                                (126)           (104)
   Compensation and benefits                                                   (59)            (36)
   Other, net                                                                  (24)            (29)
-------------------------------------------------------------------- -------------- ---------------
     Total deferred tax liabilities                                           (724)           (753)
-------------------------------------------------------------------- -------------- ---------------
Net deferred tax assets (liabilities)                                         $101            $(46)
==================================================================== ============== ===============
</TABLE>

The change in net deferred tax assets includes total  adjustments of $10 for the
year  ended  January  31,  2002,  related  to stock  options  of $(3) and  other
comprehensive income of $13.

The Company has federal and state net  operating  loss  carryforwards  of $7 and
$32,  respectively,  that  will  expire in years  2005  through  2021.  Based on
management's assessment, it is more likely than not that all of the deferred tax
assets  associated with the net operating loss  carryforwards  will be realized;
therefore, no valuation allowance is considered necessary.

Income tax expense on continuing operations consists of the following:

<TABLE>
<CAPTION>
                                          2001         2000         1999
---------------------------------- ------------ ------------ ------------
<S>                                       <C>          <C>          <C>
Current:
   Federal                               $ 462        $ 458        $ 476
   State                                    47           40           48
---------------------------------- ------------ ------------ ------------
                                           509          498          524
Deferred:
   Federal                                (124)          10          (47)
   State                                   (13)           1           (5)
---------------------------------- ------------ ------------ ------------
                                          (137)          11          (52)
---------------------------------- ------------ ------------ ------------
                                         $ 372        $ 509        $ 472
================================== ============ ============ ============
</TABLE>

                                         Albertson's, Inc. 2001 Annual Report 27
<PAGE>


The  reconciliations  between the federal  statutory  tax rate and the Company's
effective tax rates are as follows:


<TABLE>
<CAPTION>
                                                      2001      PERCENT         2000      PERCENT         1999     PERCENT
---------------------------------------------- ------------ ------------ ------------ ------------ ------------ -----------
<S>                                                   <C>          <C>          <C>          <C>          <C>         <C>
Taxes computed at statutory rate                      $306         35.0         $446         35.0         $315        35.0
State income taxes net of federal
  income tax benefit                                    37          4.2           54          4.3           38         4.2
Goodwill amortization                                   27          3.1           21          1.6           22         2.5
Merger-related charges                                                             2          0.2          115        12.8
Other                                                    2          0.3          (14)        (1.1)         (18)       (2.0)
---------------------------------------------- ------------ ------------ ------------ ------------ ------------ -----------
                                                      $372         42.6         $509         40.0         $472        52.5
============================================== ============ ============ ============ ============ ============ ===========
</TABLE>


Stock Options and Stock Awards

The Company's stock option and stock award plans (Albertson's, Inc. 1995 Amended
and Restated Stock-Based Incentive Plan) (the "1995 Plan") provide for the grant
of options to purchase  shares of common stock and stock awards.  At January 31,
2002,  Albertson's  had one  stock-based  incentive  plan in effect  under which
grants could be made with respect to 50 million  shares of the Company's  common
stock.  Under this plan,  approved by the  stockholders  most  recently in 2001,
options  and stock  awards may be  granted  to  officers  and key  employees  to
purchase the Company's  common  stock.  During 1999,  the Company's  stock-based
incentive plan was amended to, among other things,  include the grant of options
and other awards to non-employee members of the Board of Directors. During 2001,
the  Company's  stock-based  incentive  plan was amended to, among other things,
increase the number of shares allowed by the plan from 30 million to 50 million.
Generally,  options are granted with an exercise  price at not less than 100% of
the  closing  market  price  on the date of the  grant.  The  Company's  options
generally  become  exercisable  in  installments  of 20% per year on each of the
first  through fifth  anniversaries  of the grant date or vest 100% on the third
anniversary of the grant date and have a maximum term of 7 to 10 years.

DEFERRED  STOCK  UNITS   The Board of  Directors  adopted  a  program  effective
December  6, 2000,  which  authorized  the award of  deferred  stock  units with
dividend  equivalents paid in cash quarterly under the 1995 Plan to key officers
of the Company. Under this program,  900,800 of the units will be distributed in
stock on December 5, 2003, if the  applicable  officers are still employed as an
officer  of the  Company  on that  date,  unless  otherwise  deferred  by  those
officers.  The Company is recognizing  this expense over the three-year  service
period.  Additional  grants were made during  Fiscal 2001 to key officers of the
Company of which 788,670 of the units will be distributed in a manner elected by
the participant on a date after said participant  ceases to be an officer of the
Company.  8,000 of the units will be  distributed in stock on September 17, 2002
and on each September 17th for the next four years,  unless otherwise  deferred.
8,000 of the units will be distributed in stock on November 19, 2002 and on each
November 19th for the next four years, unless otherwise deferred.  21,243 of the
units will be  distributed in stock on December 3, 2002 and on each December 3rd
for the next three years and 21,245 of the units will be distributed in stock on
December 3, 2006, unless otherwise deferred.

VARIABLE ACCOUNTING TREATMENT FOR OPTION PLANS   In the first quarter of 1999, a
market  price  adjustment  of  $29  was  recorded  as  a  reduction  of  pre-tax
merger-related costs to reflect a decline in the relevant stock price at the end
of the first  fiscal  quarter  relative to 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 Albertson's shares.

LSARs  relating to  approximately  4.0 million  equivalent  stock options became
exercisable  upon regulatory  approval of the merger with ASC, which resulted in
recognition  of an  additional  pre-tax  charge of $76 in the second  quarter of
Fiscal 1999.  This charge was based upon a change of control price of $56.96 per
share, which included an adjustment factor for the early termination of the LSAR
feature.  A total of 0.8 million  Albertson's 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
Albertson's shares.


                                         Albertson's, Inc. 2001 Annual Report 28

<PAGE>
STOCK OPTIONS - A summary of shares reserved for  outstanding  options as of the
fiscal year end,  changes during the year and related  weighted average exercise
price is presented below (shares in thousands):
<TABLE>
<CAPTION>
                                               JANUARY 31, 2002            FEBRUARY 1, 2001          FEBRUARY 3, 2000
                                          ---------------------------- ------------------------- -------------------------
                                                  SHARES        PRICE       SHARES        PRICE       SHARES        PRICE
----------------------------------------- --------------- ------------ ------------ ------------ ------------ ------------
<S>                                               <C>         <C>           <C>         <C>           <C>         <C>
Outstanding at beginning of year                  25,290      $ 32.79       18,015      $ 38.34        9,989      $ 35.01
Granted                                            6,406        32.64        8,683        21.78       12,536        39.76
Exercised                                         (1,303)       22.71         (287)       21.54       (3,907)       33.00
Forfeited                                         (2,348)       34.70       (1,121)       39.58         (603)       39.43
----------------------------------------- --------------- ------------ ------------ ------------ ------------ ------------
Outstanding at end of year                        28,045      $ 33.06       25,290      $ 32.79       18,015      $ 38.34
========================================= =============== ============ ============ ============ ============ ============
Options exercisable at end of year                11,414      $ 35.67        7,251      $ 37.14        5,640      $ 35.44
========================================= =============== ============ ============ ============ ============ ============
</TABLE>

As of January 31,  2002,  there were 20 million  shares of Company  common stock
reserved for the granting of additional options and stock awards.

The following table summarizes options outstanding and options exercisable as of
January 31, 2002, and the related  weighted average  remaining  contractual life
(years) and weighted average exercise price (shares in thousands):
<TABLE>
<CAPTION>
                                          OPTIONS OUTSTANDING                OPTIONS EXERCISABLE
                               ------------------------------------------ ---------------------------
                                        SHARES     REMAINING                      SHARES
OPTION PRICE PER SHARE             OUTSTANDING          LIFE       PRICE     EXERCISABLE       PRICE
------------------------------ ---------------- ------------- ----------- --------------- -----------
<C>        <C>                          <C>              <C>     <C>              <C>        <C>
$ 16.87  - $ 22.63                       7,139           8.8     $ 21.66           1,821     $ 21.59
  24.31  -   34.87                      13,629           8.3       31.42           4,541       30.24
  35.00  -   45.94                       2,601           4.7       40.43           2,601       40.43
  47.00  -   51.19                       4,676           7.4       51.15           2,451       51.11
------------------------------ ---------------- ------------- ----------- --------------- -----------
$ 16.87  - $ 51.19                      28,045           7.9     $ 33.06          11,414     $ 35.67
============================== ================ ============= =========== =============== ===========
</TABLE>

The weighted average fair value at date of grant for Albertson's options granted
during  2001,  2000,  and  1999  was  $6.61,   $7.35,  and  $10.42  per  option,
respectively. The fair value of options at date of grant was estimated using the
Black-Scholes model with the following weighted average assumptions:
<TABLE>
<CAPTION>
                                               2001         2000         1999
----------------------------------- ----------------- ------------ ------------
<S>                                           <C>          <C>          <C>
Expected life (years)                           3.0          3.0          3.0
Risk-free interest rate                        3.62%        5.46%        5.96%
Volatility                                    30.09        54.83        37.03
Dividend yield                                 2.33         3.49         1.81
</TABLE>

The  Company  has  adopted  the  disclosure-only  provisions  of SFAS  No.  123,
"Accounting for Stock-Based Compensation." Had compensation cost been determined
based on the fair value at the grant date consistent with the provisions of this
statement,  the  Company's  pro forma net  earnings and earnings per share would
have been as follows:
<TABLE>
<CAPTION>
                                            2001         2000         1999
------------------------------------ ------------ ------------ ------------
<S>                                        <C>          <C>          <C>
Net earnings:
   As reported                             $ 501        $ 765        $ 404
   Pro forma                                 472          738          375
Basic earnings per share:
   As reported                              1.23         1.83         0.96
   Pro forma                                1.16         1.77         0.89
Diluted earnings per share:
   As reported                              1.23         1.83         0.95
   Pro forma                                1.16         1.76         0.89
</TABLE>

The 2001 and 2000 pro forma net  earnings  resulted  from  reported net earnings
less pro forma after-tax  compensation  expense.  The 1999 pro forma earnings of
$375  resulted  from  reported  net  earnings  of $404,  less the 1999 pro forma
after-tax compensation expense of $67 ($49 of which related to an adjustment for
the  acceleration  of  unamortized  compensation  expense for the stock  options
granted prior to 1999 which vested in  connection  with the merger with ASC) and
the  elimination  of net  merger-related  after-tax  stock option charges of $38
included with as-reported net earnings.  The pro forma effect on net earnings is
not representative of the pro forma effect on net earnings in future years.

                                         Albertson's, Inc. 2001 Annual Report 29
<PAGE>


Employee Benefit Plans

Substantially  all  employees  working  over 20 hours  per week are  covered  by
retirement plans. Union employees participate in multi-employer retirement plans
under  collective  bargaining  agreements.  The Company  sponsors  both  defined
benefit and defined contribution plans.

The  Albertson's  Salaried  Employees  Pension  Plan and  Albertson's  Employees
Corporate Pension Plan are funded, qualified,  defined benefit,  noncontributory
plans for  eligible  Albertson's  employees  who are 21 years of age with one or
more  years  of  service  and  (with  certain  exceptions)  are not  covered  by
collective bargaining  agreements.  Benefits paid to retirees are based upon age
at retirement, years of credited service and average compensation. The Company's
funding policy for these plans is to contribute the amount necessary to meet the
funding requirements as defined by the Internal Revenue Code.

The  Company  also  sponsors  the  Albertson's  Savings and  Retirement  Estates
("ASRE") Plan (formerly the American Stores Retirement  Estates Plan) which is a
defined contribution  retirement plan. ASRE was originally authorized by the ASC
Board  of  Directors  for the  purpose  of  providing  retirement  benefits  for
employees of ASC and its  subsidiaries.  During  1999,  ASRE was  authorized  by
Albertson's Board of Directors to provide retirement  benefits for all qualified
employees  of  the  Company  and  its  subsidiaries.  In  conjunction  with  the
authorization of ASRE, the company-sponsored  defined benefit plans were amended
to close the plans to future new entrants.  Future accruals for  participants in
the  defined  benefit  plans are offset by the value of Company  profit  sharing
contributions to the new defined contribution plan.

The Company sponsors a tax-deferred savings plan which is a salary deferral plan
pursuant  to  Section  401(k) of the  Internal  Revenue  Code.  The plan  covers
employees  meeting  age  and  service  eligibility  requirements,  except  those
represented  by a  labor  union,  unless  the  collective  bargaining  agreement
provides  for  participation.  In  addition,  the  Company  provides  a matching
contribution  based on the amount of eligible  compensation  contributed  by the
employee.

All Company contributions to ASRE and the company-sponsored 401(k) plan are made
at the discretion of the Board of Directors. The total amount contributed by the
Company is included with the ASRE defined contribution plan expense.

The  Company  also  sponsors an unfunded  Executive  Pension  Makeup Plan and an
Executive ASRE Makeup Plan. These plans are nonqualified and provide certain key
employees  retirement  benefits which supplement those provided by the Company's
other retirement plans.

Net periodic  benefit  (income)  expense for defined benefit plans is determined
using  assumptions  as of the  beginning  of each year.  The  projected  benefit
obligation and related funded status are determined using  assumptions as of the
end  of  each  year.   Assumptions  used  at  the  end  of  each  year  for  the
company-sponsored defined benefit pension plans were as follows:

<TABLE>
<CAPTION>
                                                           2001         2000         1999
---------------------------------------------------- ------------ ------------ ------------
<S>                                                   <C>          <C>          <C>
Weighted-average discount rate                             6.75%        7.15%        7.50%
Annual salary increases                               3.70-4.50    3.70-4.50    4.35-4.50
Expected long-term rate of return on assets                9.00         9.50         9.50
</TABLE>

Net periodic  benefit  (income)  expense for  company-sponsored  defined benefit
pension plans was as follows:

<TABLE>
<CAPTION>
                                                           2001         2000         1999
---------------------------------------------------- ------------ ------------ ------------
<S>                                                         <C>          <C>          <C>
Service cost - benefits earned during the period           $ 11         $ 14         $ 45
Interest cost on projected benefit obligations               35           32           34
Expected return on assets                                   (48)         (55)         (49)
Amortization of prior service cost                           (7)           5
Recognized net actuarial (gain) loss                                      (4)           1
---------------------------------------------------- ------------ ------------ ------------
                                                           $ (9)        $ (8)        $ 31
==================================================== ============ ============ ============
</TABLE>



                                         Albertson's, Inc. 2001 Annual Report 30

<PAGE>


The  following  table  sets  forth the  funded  status of the  company-sponsored
defined benefit pension plans:

<TABLE>
<CAPTION>
                                                                      JANUARY 31,      FEBRUARY 1,
                                                                             2002             2001
------------------------------------------------------------------ --------------- ----------------
<S>                                                                         <C>              <C>
Change in projected benefit obligation:
 Beginning of year benefit obligation                                       $ 495            $ 423
 Service cost                                                                  11               14
 Interest cost                                                                 35               32
 Actuarial loss                                                                41               29
 Amendments                                                                                     11
 Benefits paid                                                                (15)             (14)
------------------------------------------------------------------ --------------- ----------------
 End of year benefit obligation                                               567              495
------------------------------------------------------------------ --------------- ----------------
Change in plan assets:
 Plan assets at fair value at beginning of year                               537              582
 Actual return on plan assets                                                 (57)             (32)
 Employer contributions                                                         1                1
 Benefit payments                                                             (15)             (14)
------------------------------------------------------------------ --------------- ----------------
 Plan assets at fair value at end of year                                     466              537
------------------------------------------------------------------ --------------- ----------------
Funded status                                                                (101)              42
Unrecognized net loss                                                         165               19
Unrecognized prior service cost                                               (71)             (79)
Additional minimum liability                                                  (67)              (1)
------------------------------------------------------------------ --------------- ----------------
Net accrued pension cost                                                    $ (74)           $ (19)
------------------------------------------------------------------ --------------- ----------------
Prepaid pension cost included with other assets                             $  25            $  16
Accrued pension cost included with other long-term liabilities                (99)             (35)
------------------------------------------------------------------ --------------- ----------------
Net accrued pension cost                                                    $ (74)           $ (19)
================================================================== =============== ================
</TABLE>

At January 31, 2002, the accumulated  benefit obligation exceeded the fair value
of the plans' assets in the Albertson's Employees Corporate Pension Plan and the
Executive  Pension  Makeup  Plan.  The  provisions  of SFAS No. 87,  "Employers'
Accounting  for  Pensions,"  require  recognition  in the  balance  sheet  of an
additional minimum liability and related intangible asset for pension plans with
accumulated  benefits in excess of plan assets;  any portion of such  additional
liability  which is in excess of the plan's prior service cost is a component of
other  comprehensive  income and is reflected in  stockholders'  equity,  net of
related tax  benefit.  Accordingly,  at January 31, 2002, a liability of $67 was
included in other long-term liabilities,  an intangible asset equal to the prior
service  cost of $28 was  included in other  assets,  and a charge of $23 net of
deferred taxes of $16 was reflected as a minimum pension liability adjustment in
other  comprehensive   income  under  stockholders'   equity  in  the  Company's
Consolidated Balance Sheets.

The following table  summarizes the projected  benefit  obligation,  accumulated
benefit  obligation,  and  plan  assets  of the  individual  plans  that  have a
projected benefit obligation in excess of plan assets:


<TABLE>
<CAPTION>
                                                        JANUARY 31,      FEBRUARY 1,
                                                               2002             2001
---------------------------------------------------- --------------- ----------------
<S>                                                            <C>              <C>
Projected benefit obligation:
  Albertson's Employees Corporate Pension Plan                 $331             $289
  Executive Pension Makeup Plan                                  20               18
Accumulated benefit obligation:
  Albertson's Employees Corporate Pension Plan                  330              288
  Executive Pension Makeup Plan                                  20               16
Plan assets (fair market value):
  Albertson's Employees Corporate Pension Plan                  250              285
</TABLE>

Assets of the two funded Company  defined  benefit pension plans are invested in
directed  trusts.  Assets in the directed  trusts are invested in common  stocks
(including $52 of the Company's common stock at January 31, 2002 and February 1,
2001), U.S. government obligations, corporate bonds, international equity funds,
real estate and money market funds.


                                         Albertson's, Inc. 2001 Annual Report 31

<PAGE>


The Company also  contributes  to various  plans under  industrywide  collective
bargaining  agreements,  primarily  for defined  benefit  pension  plans.  Total
contributions to these plans were $49 for 2001, $58 for 2000, and $98 for 1999.

Retirement plans expense was as follows:
<TABLE>
<CAPTION>
                                                  2001         2000         1999
------------------------------------------ ------------ ------------ ------------
<S>                                               <C>          <C>          <C>
Defined benefit pension plans                   $  ( 9)       $  (8)       $  31
ASRE defined contribution plan                     154          155          110
Multi-employer plans                                49           58           98
------------------------------------------ ------------ ------------ ------------
                                                $  194        $ 205        $ 239
========================================== ============ ============ ============
</TABLE>

Most  retired  employees of the Company are eligible to remain in its health and
life insurance plans. Retirees who elect to remain in the  Albertson's-sponsored
plans  are  charged  a  premium  which is equal to the  difference  between  the
estimated  costs of the benefits for the retiree group and a fixed  contribution
amount  made by the  Company.  The Company  also  provides  certain  health care
benefits to eligible ASC retirees of certain  defined  employee groups under two
unfunded  plans,  a defined  dollar and a full coverage  plan.  The net periodic
postretirement benefit cost was as follows:

<TABLE>
<CAPTION>
                                                  2001         2000         1999
------------------------------------------ ------------ ------------ ------------
<S>                                                <C>          <C>          <C>
Service cost                                       $ 3          $ 3          $ 3
Interest cost                                        4            4            4
Amortization of unrecognized gain                   (1)          (1)          (1)
------------------------------------------ ------------ ------------ ------------
                                                   $ 6          $ 6          $ 6
========================================== ============ ============ ============
</TABLE>

The  following  table  sets  forth the  funded  status of the  company-sponsored
postretirement health and life insurance benefit plans:
<TABLE>
<CAPTION>
                                                                                              JANUARY 31,    FEBRUARY 1,
                                                                                                     2002           2001
------------------------------------------------------------------------------------------- -------------- --------------
<S>                                                                                                 <C>            <C>
Change in accumulated benefit obligation:
   Beginning of year benefit obligation                                                             $  66          $  62
   Service cost                                                                                         3              3
   Interest cost                                                                                        4              4
   Plan participants' contributions                                                                    12             10
   Actuarial loss                                                                                       2              2
   Benefits paid                                                                                      (16)           (15)
-------------------------------------------------------------------------------------------- -------------- --------------
   End of year benefit obligation                                                                      71             66
-------------------------------------------------------------------------------------------- -------------- --------------
Plan assets activity:
   Employer contributions                                                                               5              5
   Plan participants' contributions                                                                    12             10
   Benefit payments                                                                                   (17)           (15)
-------------------------------------------------------------------------------------------- -------------- --------------
Funded status                                                                                         (71)           (66)
Unrecognized net gain                                                                                 (10)           (16)
-------------------------------------------------------------------------------------------- -------------- --------------
Accrued postretirement benefit obligations included with other long-term liabilities                $ (81)         $ (82)
============================================================================================ ============== ==============
Discount rates as of end of year                                                                     6.75%          7.15%
-------------------------------------------------------------------------------------------- -------------- --------------
</TABLE>

For measurement purposes, a 6% annual rate of increase in the per capita cost of
covered  health care  benefits  was assumed for plans  covering ASC retirees for
2001 and is  expected  to remain at that level  thereafter.  For the ASC defined
dollar plan, no future increases in the subsidy level were assumed. Annual rates
of increases in health care costs are not  applicable in the  calculation of the
Albertson's  benefit  obligation  because  Albertson's  contribution  is a fixed
amount per participant.

With the  exception  of the  plans  covering  ASC  grandfathered  retirees,  all
postretirement plans are contributory, with participants' contributions adjusted
annually.  The accounting for the health care plans anticipates that the Company
will  not   increase   its   contribution   for   health   care   benefits   for
non-grandfathered retirees in future years.

                                         Albertson's, Inc. 2001 Annual Report 32
<PAGE>


Since the subsidy  levels for the  Albertson's  and the ASC defined dollar plans
are fixed and the  proportion of  grandfathered  ASC retirees is small, a health
care cost trend increase or decrease has no material  impact on the  accumulated
postretirement benefit obligation or the postretirement benefit expense.

SFAS No. 112,  "Employers'  Accounting  for  Postemployment  Benefits"  requires
employers to recognize an obligation for benefits provided to former or inactive
employees after  employment but before  retirement.  The Company is self-insured
for certain of its employees'  short-term and long-term  disability  plans which
are the primary benefits paid to inactive employees prior to retirement.

During 2001, a plan amendment made to the Company's  long-term  disability  plan
changed the salary continuation feature from a cumulative benefit based on years
of service to a set percentage of salary benefit.  This amendment  resulted in a
reduction  of the  obligation  by  $36,  which  was  recognized  immediately  in
accordance with the Company's policy for plan amendments. Following is a summary
of  the  obligation  for  postemployment  benefits  included  in  the  Company's
Consolidated Balance Sheets:

<TABLE>
<CAPTION>
                                                    JANUARY 31,    FEBRUARY 1,
                                                           2002           2001
------------------------------------------------- -------------- --------------
<S>                                                        <C>            <C>
Included with salaries and related liabilities             $ 12           $ 12
Included with other long-term liabilities                    54             74
------------------------------------------------- -------------- --------------
                                                           $ 66           $ 86
================================================= ============== ==============
</TABLE>

The Company also  contributes  to various  plans under  industrywide  collective
bargaining  agreements  which  provide for health  care  benefits to both active
employees and retirees.  Total  contributions to these plans were $362 for 2001,
$286 for 2000, and $316 for 1999.


Employment Contracts

The Company has entered into  employment  contracts with certain  executives for
periods up to three years (and ten years for the Chairman of the Board and Chief
Executive Officer).  The agreements include specified amounts for signing bonus,
base salary, annual bonus payments,  stock option awards and deferred stock unit
awards.  In the event of termination of employment  without cause, the executive
would be  entitled  to  certain  guaranteed  payments  and the  vesting of stock
awards.

In  addition,  as part of the merger with ASC,  the  Company  has  entered  into
retention agreements with certain executives under which they are paid an annual
retention  bonus if they  continue to be employed  by the Company  through  June
2002.


Leases

The Company leases a portion of its real estate.  The typical lease period is 20
to 30 years and most leases contain renewal options. Exercise of such options is
dependent on the level of business conducted at the location.  In addition,  the
Company  leases  certain  equipment.   Some  leases  contain  contingent  rental
provisions  based on sales volume at retail stores or miles traveled for trucks.
Capitalized  leases are  calculated  using  interest  rates  appropriate  at the
inception of each lease.  Following is an analysis of the Company's assets under
capitalized  leases, $12 of real estate and equipment is included in assets held
for sale at January 31, 2002:


<TABLE>
<CAPTION>
                                                  JANUARY 31,    FEBRUARY 1,
                                                         2002           2001
----------------------------------------------- -------------- --------------
<S>                                                      <C>            <C>
Real estate and equipment                                $338           $314
Accumulated amortization                                 (112)          (132)
----------------------------------------------- -------------- --------------
                                                         $226           $182
=============================================== ============== ==============
</TABLE>



                                         Albertson's, Inc. 2001 Annual Report 33

<PAGE>
Future minimum lease payments for noncancelable  operating leases (which exclude
the  amortization  of  acquisition-related  fair  value  adjustments),   related
subleases and capital leases at January 31, 2002, are as follows:
<TABLE>
<CAPTION>
                                                  OPERATING                   CAPITAL
                                                     LEASES    SUBLEASES       LEASES
----------------------------------------------- ------------ ------------ ------------
<C>                                                  <C>          <C>           <C>
2002                                                 $  333       $ (43)        $  45
2003                                                    332         (36)           42
2004                                                    318         (29)           40
2005                                                    292         (19)           37
2006                                                    267         (15)           37
Remainder                                             2,264         (61)          467
----------------------------------------------- ------------ ------------ ------------
Total minimum obligations (receivables)              $3,806       $(203)          668
=============================================== ============ ============
Interest                                                                         (378)
----------------------------------------------- ------------ ------------ ------------
Present value of net minimum obligations                                          290
Current portion                                                                   (14)
----------------------------------------------- ------------ ------------ ------------
Long-term obligations at January 31, 2002                                       $ 276
=============================================== ============ ============ ============
</TABLE>

The Company is  contingently  liable as a guarantor of certain  leases that were
assigned  to third  parties  in  connection  with  various  store  closures  and
dispositions.  The Company  believes the  likelihood of a significant  loss from
these  agreements is remote because of the wide  dispersion  among third parties
and remedies  available to the Company  should the primary party fail to perform
under the agreements.

Rent  expense   under   operating   leases,   excluding  the   amortization   of
acquisition-related  fair value  adjustments of $13 in 2001, and $14 in 2000 and
1999, was as follows:
<TABLE>
<CAPTION>
                                              2001         2000         1999
-------------------------------------- ------------ ------------ ------------
<S>                                          <C>          <C>          <C>
Minimum rent                                 $ 375        $ 369        $ 330
Contingent rent                                 28           30           29
-------------------------------------- ------------ ------------ ------------
                                               403          399          359
Sublease rent                                  (94)         (97)         (58)
-------------------------------------- ------------ ------------ ------------
                                             $ 309        $ 302        $ 301
====================================== ============ ============ ============
</TABLE>

Related Party Transactions

In the normal  course  of  business,  Albertson's  has  entered  into leases for
9 stores and 2 office locations ($3 of rent paid during Fiscal 2001),  purchased
a piece of land ($2 during Fiscal 2001),  purchased  inventory  for resale  ($82
during  Fiscal  2001),  and engaged  consulting  services  (insignificant)  from
entities that have a relationship with certain members of the Company's Board of
Directors.  All of the  foregoing  transactions  were  conducted at  competitive
rates.

The Company has made loans to certain  executive  officers  in  connection  with
their  relocation.  As  of  January  31,  2002,  the  amounts  outstanding  were
insignificant.

Financial Instruments

Financial  instruments which potentially subject the Company to concentration of
credit risk consist principally of cash equivalents and receivables. The Company
limits the amount of credit  exposure to each individual  financial  institution
and  places  its  temporary  cash  into  investments  of  high  credit  quality.
Concentrations  of credit risk with  respect to  receivables  are limited due to
their dispersion across various companies and geographies.

The estimated  fair values of cash and cash  equivalents,  accounts  receivable,
accounts  payable,  short-term  debt,  commercial paper and bank line borrowings
approximate  their carrying  amounts.  Substantially all of the fair values were
estimated  using quoted market  prices.  The estimated  fair values and carrying
amounts  of  outstanding   debt  (excluding   commercial  paper  and  bank  line
borrowings) were as follows:
<TABLE>
<CAPTION>
                                                    JANUARY 31,    FEBRUARY 1,
                                                           2002           2001
------------------------------------------------- -------------- --------------
<S>                                                     <C>            <C>
Fair value                                              $ 5,516        $ 4,470
Carrying amount                                           5,183          4,624
</TABLE>
                                         Albertson's, Inc. 2001 Annual Report 34
<PAGE>


Environmental

The Company has identified  environmental  contamination sites related primarily
to underground petroleum storage tanks and groundwater  contamination at various
store,  warehouse,  office  and  manufacturing  facilities  (related  to current
operations as well as previously  disposed of businesses).  The Company conducts
an ongoing 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. Undiscounted reserves have been established
for each  environmental  contamination  site  unless an  unfavorable  outcome is
remote.  Although the ultimate outcome and expense of environmental  remediation
is uncertain,  the Company  believes that required  remediation  and  continuing
compliance with environmental laws, in excess of current reserves, will not have
a material  adverse  effect on the financial  condition of the Company.  Charges
against earnings for  environmental  remediation were not material in 2001, 2000
or 1999.



Legal Proceedings

In April 2000 a class action complaint was filed against  Albertson's as well as
American Stores Company,  American Drug Stores,  Inc., Sav-on Drug Stores,  Inc.
and Lucky  Stores,  Inc.,  wholly  owned  subsidiaries  of the  Company,  in the
Superior Court for the County of Los Angeles,  California (Mario Gardner, et al.
v. American  Stores  Company,  Albertson's,  Inc.,  American Drug Stores,  Inc.,
Sav-on Drug Stores,  Inc. and Lucky Stores,  Inc.) seeking  recovery of overtime
due to plaintiffs'  allegation  that they were  improperly  classified as exempt
under  California  law. A class  action with  respect to Sav-on  Drug  assistant
managers was  certified  by the court.  A case with very  similar  claims,  also
involving the assistant drug managers and operating managers,  was filed against
the Company's  subsidiary Sav-on Drug Stores, Inc. in Los Angeles Superior Court
(Rocher,  Dahlin et al. v. Sav-on Drug Stores, Inc.) and was also certified as a
class  action.  Subsequent  to year  end,  the  Court of  Appeal of the State of
California,  Second Appellate District reversed the Rocher class  certification,
leaving only two plaintiffs.  The Company will now seek  decertification  of the
Gardner class.  The Company has strong defenses  against these lawsuits,  and is
vigorously   defending  them.   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.

In August 2000 a class action  complaint  was filed  against  Jewel Food Stores,
Inc., an indirect wholly owned  subsidiary of the Company,  in the Circuit Court
of Cook County,  Illinois (Maureen Baker, et al.  v. Jewel Food Stores, Inc. and
Dominick's Supermarkets,  Inc., Case No. 00L 009664) alleging milk price fixing.
On December 21, 2001, the Company's motion for summary judgment was denied,  and
the Company has appealed this denial.  The Company has strong  defenses  against
this lawsuit,  and is vigorously  defending it. Although this lawsuit is 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 this  action to have a material  adverse  effect on the
Company's financial condition.

An agreement  has been  reached,  and court  approval  granted,  to settle eight
purported class and/or collective  actions which were consolidated in the United
States  District Court in Boise,  Idaho,  which raised various issues  including
"off the clock" work  allegations and  allegations  regarding  certain  salaried
grocery  managers' exempt status.  Under the settlement  agreement,  current and
former  employees  who meet  eligibility  criteria may present their claims to a
settlement  administrator.  Additionally,  current and former  grocery  managers
employed in the state of California  may present their exempt status claims to a
settlement  administrator.  While the Company cannot specify the exact number of
individuals  who are  likely to  submit  claims  and the  exact  amount of their
claims,  the $37 pre-tax ($22 after-tax)  charge recorded by the Company in 1999
is the Company's  current  estimate of the total monetary  liability,  including
attorney  fees,  for all eight  cases.  During  the first  quarter  of 2001 this
liability was reduced by an $18 cash payment for legal expenses.

The Company is also involved in routine litigation incidental to operations. The
Company utilizes various methods of alternative  dispute  resolution,  including
settlement  discussions,  to manage the costs and uncertainties  inherent in the
litigation  process.  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.


                                         Albertson's, Inc. 2001 Annual Report 35

<PAGE>



Recent Accounting Standards

Effective  February  2, 2001,  the  Company  adopted  SFAS No.  133 as  amended,
"Accounting  for Derivative  Instruments and Hedging  Activities."  SFAS No. 133
requires all derivative financial  instruments to be recognized as either assets
or liabilities in the Consolidated Balance Sheet and measured at fair value. The
cumulative  effect of adoption  of SFAS No. 133 as it relates to  interest  rate
locks was a $5 gain (net of taxes).  Losses on  contracts  settled  during  2001
amounted to $1 (net of taxes). These amounts are reported in other comprehensive
income  in the  accompanying  Consolidated  Stockholders'  Equity.  The  amounts
reclassified  from other  comprehensive  income to interest expense for 2001 and
the expected reclassifications for 2002 are insignificant.

In June 2001 the  Financial  Accounting  Standards  Board (FASB)  issued two new
pronouncements SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill
and Other Intangible  Assets." SFAS No. 141, which is effective for acquisitions
initiated  after June 30,  2001,  prohibits  the use of the  pooling-of-interest
method for business  combinations  and  establishes the accounting and financial
reporting  requirements for business combinations  accounted for by the purchase
method.  Adoption of this standard had no effect on the financial  statements of
the Company.  SFAS No. 142 requires  that an  intangible  asset that is acquired
shall  be  initially  recognized  and  measured  based on its  fair  value.  The
statement  also  provides that  goodwill  should not be amortized,  but shall be
tested for impairment  annually,  or more frequently if  circumstances  indicate
potential impairment, through a comparison of fair value to its carrying amount.
SFAS No. 142 became effective for Albertson's on February 1, 2002. In accordance
with the  provisions  of SFAS No. 142, the Company will complete the analysis of
goodwill  and other  intangible  assets for  impairment  no later than August 1,
2002, and will record any required impairment by the end of 2002. The Company is
currently  evaluating  the impact of the new  accounting  standard  on  existing
goodwill and other intangible  assets. The ultimate impact of the new accounting
standard has yet to be determined. The net book value of goodwill was $1,468 and
$1,560 as of January  31,  2002 and  February  1, 2001,  respectively.  Goodwill
amortization  expense of $56, $57, and $58 was recorded in 2001, 2000, and 1999,
respectively, and will no longer be recorded in subsequent fiscal years.

In July 2001 the FASB  issued  SFAS No. 143,  "Accounting  for Asset  Retirement
Obligations."  SFAS No. 143 will become effective for Albertson's on January 31,
2003.  This  statement   addresses   financial   accounting  and  reporting  for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. The Company is currently analyzing the effect
that this standard will have on its financial  statements,  but believes it will
not have a significant effect on the financial statements of the Company.

In August 2001 the FASB issued SFAS No. 144,  "Accounting  for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 which replaces SFAS No. 121 and APB
No. 30, became  effective for  Albertson's  on February 1, 2002.  This Statement
retains  the  requirements  to (i)  recognize  an  impairment  loss  only if the
carrying amount of a long-lived  asset is not recoverable  from its undiscounted
cash flows and (ii) measure an  impairment  loss as the  difference  between the
carrying  amount and fair value of the asset.  This Statement  removes  goodwill
from its scope,  eliminating the requirement to allocate  goodwill to long-lived
assets to be tested for  impairment.  This Statement  requires that a long-lived
asset to be abandoned,  exchanged for a similar  productive asset or distributed
to owners in a spin-off,  be  considered  held and used until it is disposed of.
This  Statement  requires  the  accounting  model  for  long-lived  assets to be
disposed of by sale, be used for all long-lived assets,  whether previously held
and used or newly acquired.  Discontinued operations are no longer measured on a
net realizable value basis, and future operating losses are no longer recognized
before they occur.  This Statement  broadens the  presentation  of  discontinued
operations in the income  statement to include a component of an entity  (rather
than a segment of a business). A component of an entity comprises operations and
cash flows that can be clearly  distinguished,  operationally  and for financial
reporting  purposes,  from the rest of the  entity.  The  Company  is  currently
analyzing the effect that this  standard  will have on its financial  statements
and  believes  it will  require  additional  disclosures  but  will  not  have a
significant effect on the operating results of the Company.

Emerging  Issues Task Force ("EITF") Issue Nos.  00-14,  "Accounting for Certain
Sales  Incentives;"  00-22,  "Accounting  for  Points  and Other  Time-Based  or
Volume-Based  Sales and  Incentive  Offers,  and  Offers  for Free  Products  or
Services to be Delivered in the Future;"  and 00-25,  "Vendor  Income  Statement
Characterization  of  Consideration  from a Vendor to a  Retailer"  address  the
appropriate  accounting for certain vendor contracts and loyalty  programs.  The
Company's   accounting   procedures  are  in  compliance   with  the  accounting
requirements called for by these Issues.


                                         Albertson's, Inc. 2001 Annual Report 36

<PAGE>


<TABLE>
<CAPTION>
Computation of Earnings Per Share
                                                             2001                   2000                    1999
--------------------------------------------------- ----------------------- ---------------------- -----------------------
                                                      DILUTED       BASIC    DILUTED       BASIC     DILUTED       BASIC
                                                    ----------- ----------- ---------- ----------- ----------- -----------
<S>                                                      <C>         <C>        <C>         <C>         <C>         <C>
Net earnings                                             $501        $501       $765        $765        $404        $404
                                                         ====        ====       ====        ====        ====        ====

Weighted average common shares outstanding                406         406        418         418         422         422
                                                                      ===                    ===                     ===
Common share equivalents                                    2                     -                        1
                                                         ----                   ----                    ----

Weighted average shares outstanding                       408                    418                     423
                                                         ====                   ====                    ====
Earnings per common share and common share
    equivalent:                                         $1.23       $1.23      $1.83       $1.83       $0.95       $0.96
                                                        =====       =====      =====       =====       =====       =====

Calculation Of Common Share Equivalents:
    Options to purchase common shares                      17                      2                       6
    Common shares assumed purchased with
       potential proceeds                                 (15)                    (2)                     (5)
                                                          ---                    ---                     ---
    Common share equivalents                                2                     -                        1
                                                          ===                    ===                     ===

Calculation Of Common Shares Assumed
 Purchased With Potential Proceeds:
    Potential proceeds from exercise of options
       to purchase common shares                         $455                   $ 52                    $242
    Common stock price used under the treasury
       stock method                                    $31.12                 $27.99                  $46.18
    Common shares assumed purchased with
       potential proceeds                                  15                      2                       5
</TABLE>


Outstanding  options  excluded in 2001, 2000 and 1999 (option price exceeded the
average  market  price  during  the  period)  amounted  to  9.4 million  shares,
16.6 million shares, and 3.5 million shares, respectively.


Subsequent Event

On March 13, 2002,  the Company  announced a second  phase in its  restructuring
process.  The Company intends to completely exit four  underperforming  markets:
Memphis,  Tennessee;  Nashville,  Tennessee;  Houston,  Texas;  and San Antonio,
Texas. These market exits will occur through a combination of store closures and
store sales and involve a total of 95 stores.  In  connection  with this action,
the number of  division  offices  will be  reduced  from 15 to 11 and the Tulsa,
Oklahoma  and Houston,  Texas  distribution  facilities  will be sold or closed.
Albertson's  expects to record  nonrecurring  pre-tax  charges of  approximately
$580,  primarily related to asset impairments in this  restructuring  plan. This
$580 total includes  approximately  $510 in noncash charges.  The disposition of
all the assets related to this  restructuring  plan should generate net positive
pre-tax cash flow of about $180.

Albertson's  recently  announced  the sale of the Tulsa,  Oklahoma  distribution
facility,  as mentioned above, to Fleming  Companies,  Inc. This sales agreement
also includes a long-term  supply  arrangement  under which Fleming will provide
procurement  and  distribution  services for  Albertson's  Oklahoma and Nebraska
stores.



                                         Albertson's, Inc. 2001 Annual Report 37

<PAGE>



INDEPENDENT
AUDITORS' REPORT




Deloitte
& Touche


The Board of Directors and Stockholders of Albertson's, Inc.:


We have audited the  accompanying  consolidated  balance sheets of  Albertson's,
Inc.,  and  subsidiaries  as of January 31, 2002 and  February 1, 2001,  and the
related  consolidated  statements of earnings,  stockholders'  equity,  and cash
flows for each of the three years in the period ended  January 31,  2002.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects, the financial position of Albertson's, Inc., and subsidiaries
at January 31, 2002 and  February 1, 2001,  and the results of their  operations
and their cash flows for each of the three years in the period ended January 31,
2002, in conformity with accounting  principles generally accepted in the United
States of America.










         Deloitte & Touche LLP
         Boise, Idaho
         March 15, 2002



                                         Albertson's, Inc. 2001 Annual Report 38

<PAGE>



RESPONSIBILITY FOR
FINANCIAL REPORTING




The management of  Albertson's,  Inc., is responsible  for the  preparation  and
integrity  of  the  consolidated   financial  statements  of  the  Company.  The
accompanying  consolidated  financial  statements  have  been  prepared  by  the
management of the Company,  in accordance with accounting  principles  generally
accepted in the United States of America,  using management's best estimates and
judgment where necessary. Financial information appearing throughout this Annual
Report is consistent with that in the consolidated financial statements.

To help fulfill its  responsibility,  management  maintains a system of internal
controls, including an internal audit department, designed to provide reasonable
assurance that assets are safeguarded  against loss or unauthorized use and that
transactions are executed in accordance with management's authorizations and are
reflected  accurately  in the  Company's  records.  This  system is  continually
reviewed,  improved,  and  modified  in  response  to  changing  conditions  and
operations, and to recommendations made by the independent auditors and internal
auditors.  The concept of reasonable  assurance is based on the recognition that
the cost of  maintaining  a system of internal  accounting  controls  should not
exceed  benefits  expected to be derived from the system.  The Company  believes
that its long-standing  emphasis on the highest standards of conduct and ethics,
set forth in comprehensive  written policies,  serves to reinforce its system of
internal controls.

Deloitte & Touche LLP, independent auditors,  audited the consolidated financial
statements  in  accordance  with auditing  standards  generally  accepted in the
United States of America to  independently  assess the fair  presentation of the
Company's financial position, results of operations and cash flows.

The  Audit/Finance  Committee of the Board of  Directors,  composed  entirely of
outside   directors,   oversees   the   fulfillment   by   management   of   its
responsibilities  over  financial  controls  and the  preparation  of  financial
statements.  The  Audit/Finance  Committee  meets  with  internal  and  external
auditors at least four times per year to review  audit plans and audit  results.
This  provides  internal and  external  auditors  direct  access to the Board of
Directors.

Management recognizes its responsibility to conduct the business of Albertson's,
Inc.,  in  accordance  with  high  ethical  standards.  This  responsibility  is
reflected in key policy statements that, among other things, address potentially
conflicting  outside business  interests of Company employees and specify proper
conduct of business activities.  Ongoing  communications and review programs are
designed to help ensure compliance with these policies.










         Larry Johnston                         Felicia Thornton
         Chairman of the Board &                Executive Vice President &
         Chief Executive Officer                Chief Financial Officer


                                         Albertson's, Inc. 2001 Annual Report 39

<PAGE>


FIVE-YEAR SUMMARY
OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
                                                     52 WEEKS         52 WEEKS         53 WEEKS          52 WEEKS        52 WEEKS
                                                  JANUARY 31,      FEBRUARY 1,      FEBRUARY 3,       JANUARY 28,     JANUARY 29,
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)             2002             2001             2000              1999            1998
------------------------------------------------- --------------- ---------------- ---------------- ---------------- ---------------
<S>                                                  <C>              <C>              <C>               <C>             <C>
Operating Results:
Sales                                                $ 37,931         $ 36,762         $ 37,478          $ 35,872        $ 33,828
Earnings before extraordinary item                        501              765              427               801             797
Extraordinary item                                                                          (23)
Net earnings                                              501              765              404               801             797
Net earnings as a percent to sales                       1.32%            2.08%            1.08%             2.23%           2.36%

Common Stock Data:
Earnings per share before extraordinary item:
   Basic                                               $ 1.23           $ 1.83           $ 1.01            $ 1.91          $ 1.89
   Diluted                                               1.23             1.83             1.00              1.90            1.88
Extraordinary item:
   Basic                                                                                  (0.05)
   Diluted                                                                                (0.05)
Earnings per share:
   Basic                                                 1.23             1.83             0.96              1.91            1.89
   Diluted                                               1.23             1.83             0.95              1.90            1.88

Cash dividends per share:
   Albertson's, Inc.                                     0.76             0.76             0.72              0.68            0.64
   American Stores Company equivalent                                                      0.14              0.57            0.56

Financial Position:
Total assets                                         $ 15,967         $ 16,078         $ 15,719          $ 15,131        $ 13,767
Long-term debt and capitalized lease obligations        5,336            5,942            4,990             5,108           4,333

Other Year End Statistics:
Number of stores                                        2,421            2,512            2,492             2,564           2,435
</TABLE>

All fiscal years consist of 52 weeks, except for 1999 which is a 53-week year.

2001 operating  results  included  pre-tax  restructuring  charges of $560 ($345
after tax or $0.85 per share),  pre-tax  gain of $54 ($32 after tax or $0.08 per
share) on sale of New England Osco  drugstores,  pre-tax credit for amendment to
benefit  plans of $36 ($21  after tax or $0.05 per  share),  pre-tax  charge for
management  changes  of $9 ($6  after  tax or  $0.01  per  share),  and  pre-tax
merger-related  credits of $6 ($4 after tax or $0.01 per  share).  Restructuring
charges included severance, the write-down of assets to net realizable value and
lease termination costs. Merger-related credits included a credit for a reversal
of a prior impairment charge as well as charges for severance, the write-down of
other assets to net realizable value and integration costs.

2000 operating  results  included  pre-tax  merger-related  charges of $151 ($93
after tax or $0.22 per  share),  and a pre-tax  charge of $20 ($12  after tax or
$0.03 per share) for an impairment - lease contingency.  Merger-related  charges
included  severance,  the  write-down  of  assets  to net  realizable  value and
integration costs.

1999 operating  results  included pre-tax  merger-related  charges of $683 ($529
after tax or $1.25 per  share),  and a pre-tax  charge of $37 ($22  after tax or
$0.05 per share) for a litigation  settlement.  Merger-related  charges included
severance,  the write-down of assets to net realizable  value,  transaction  and
financing costs, integration costs and stock option charges.

During 1999 American Stores Company paid only one quarterly  dividend due to the
consummation of the Merger.

1998 operating results included a pre-tax  merger-related stock option charge of
$195  ($132  after tax or $0.31 per share)  related  to  the  exercisability  of
6 million equivalent limited  stock  appreciation  rights due to the approval by
ASC's  stockholders of the Merger  Agreement and a $24 pre-tax charge ($16 after
tax  or   $0.04  per  share)   related   to  management's   decision   to  close
16 underperforming stores.

1997 operating  results  included  pre-tax charges of $34 related to the sale of
stock by a major stockholder and pre-tax charges of $13 related to the sale of a
division of ASC's communications subsidiary (total of $41 after tax or $0.10 per
share).


                                         Albertson's, Inc. 2001 Annual Report 40

<PAGE>


<TABLE>
<CAPTION>
QUARTERLY FINANCIAL DATA
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA - UNAUDITED)         FIRST       SECOND        THIRD       FOURTH          YEAR
---------------------------------------------------------- ------------ ------------ ------------ ------------ -------------
<S>                                                            <C>          <C>          <C>          <C>          <C>
2001
Sales                                                          $ 9,331      $ 9,577      $ 9,363      $ 9,660      $ 37,931
Gross profit                                                     2,658        2,680        2,655        2,783        10,776
Operating profit (loss)                                            435         (135)         417          596         1,313
Net earnings (loss)                                                186         (151)         176          290           501
Earnings (loss) per share:
   Basic                                                          0.46        (0.37)        0.43         0.71          1.23
   Diluted                                                        0.46        (0.37)        0.43         0.71          1.23
---------------------------------------------------------- ------------ ------------ ------------ ------------ -------------
2000
Sales                                                          $ 9,013      $ 9,214      $ 8,991      $ 9,544      $ 36,762
Gross profit                                                     2,516        2,642        2,553        2,722        10,433
Operating profit                                                   376          421          384          481         1,662
Net earnings                                                       179          194          172          220           765
Earnings per share:
   Basic                                                          0.42         0.46         0.41         0.54          1.83
   Diluted                                                        0.42         0.46         0.41         0.54          1.83
---------------------------------------------------------- ------------ ------------ ------------ ------------ -------------
</TABLE>

During 2001, operating results of quarters two, three, and four were affected by
pre-tax  restructuring  charges  totaling  $560 ($345 after tax).  Restructuring
charges included severance, the write-down of assets to net realizable value and
lease termination  costs.  First quarter 2001 included a pre-tax one-time charge
of $9 ($6 after tax) for  management  changes.  Fourth  quarter 2001  included a
pre-tax gain of $54 ($32 after tax) for the sale of New England Osco  drugstores
and a pre-tax  credit of $36 ($21 after tax) for an amendment  in the  Company's
disability benefit plans.  During 2001 and 2000 all quarters'  operating results
were affected by merger-related  charges and credits. Net pre-tax merger-related
credits  totaling  $6 ($4 after tax) were  recorded  during 2001 and net pre-tax
charges of $151 ($93 after tax) were  recorded in 2000.  Merger-related  charges
included  severance,  the  write-down  of  assets  to net  realizable  value and
integration  costs.  First  quarter 2000  included a pre-tax  charge of $20 ($12
after tax) for an impairment - lease  contingency.  The following table reflects
the net earnings (loss) and earnings per share (EPS) effect of these items.

<TABLE>
<CAPTION>
                            FIRST               SECOND                THIRD               FOURTH              ANNUAL
                      ------------------- -------------------- -------------------- ------------------- --------------------
                          NET        EPS       NET        EPS       NET        EPS      NET        EPS       NET        EPS
     EARNINGS (LOSS)     E(L)     EFFECT      E(L)     EFFECT      E(L)     EFFECT     E(L)     EFFECT      E(L)     EFFECT
--------------------- -------- ---------- --------- ---------- --------- ---------- -------- ---------- --------- ----------
2001
<S>                     <C>      <C>        <C>       <C>         <C>     <C>         <C>      <C>        <C>       <C>
Restructuring                               $(334)    $(0.82)     $ (3)   $ (0.01)    $ (8)    $(0.02)    $(345)    $(0.85)
Management change       $ (6)    $(0.01)                                                                     (6)     (0.01)
New England Osco
   drugstores sale                                                                      32       0.08        32       0.08
Benefit Plan
   amendment                                                                            21       0.05        21       0.05
Merger-related             6       0.01        (1)     (0.00)                           (1)     (0.00)        4       0.01
--------------------- -------- ---------- --------- ---------- --------- ---------- -------- ---------- --------- ----------
2000
Merger-related          $(35)    $(0.08)    $ (17)    $(0.04)     $(16)   $ (0.04)    $(25)    $(0.06)    $ (93)    $(0.22)
Impairment - Lease
   contingency           (12)     (0.03)                                                                    (12)     (0.03)
--------------------- -------- ---------- --------- ---------- --------- ---------- -------- ---------- --------- ----------
</TABLE>

The Company  estimates the quarterly LIFO  reserves,  which cannot be accurately
determined  until year end. The LIFO method of valuing  inventories  (decreased)
increased net earnings and EPS as follows:

<TABLE>
<CAPTION>
                                        FIRST       SECOND        THIRD       FOURTH         YEAR
--------------------------------- ------------ ------------ ------------ ------------ ------------
<S>                                    <C>          <C>          <C>            <C>        <C>
2001
Net earnings                           $   (4)      $   (4)      $   (5)        $  10      $   (3)
Basic and diluted EPS                   (0.01)       (0.01)       (0.01)         0.02       (0.01)
--------------------------------- ------------ ------------ ------------ ------------ ------------
2000
Net earnings                           $   (3)      $   (3)      $   (5)        $  25      $   14
Basic and diluted EPS                   (0.01)       (0.01)       (0.01)         0.06        0.03
--------------------------------- ------------ ------------ ------------ ------------ ------------
</TABLE>

Due  to  rounding  and  different  periods  used  to  compute  weighted  average
outstanding shares, the sum of the quarterly EPS may not equal the annual EPS.

                                         Albertson's, Inc. 2001 Annual Report 41
<PAGE>


OTHER
INFORMATION

The Company's  stock is traded on the New York and Pacific stock exchanges under
the symbol ABS. The high and low stock prices by quarter were as follows:


<TABLE>
<CAPTION>
                              FIRST                SECOND                THIRD               FOURTH                YEAR
                         HIGH       LOW       HIGH        LOW      HIGH        LOW       HIGH       LOW       HIGH       LOW
------------------- ---------- --------- ---------- ---------- --------- ---------- ---------- --------- ---------- ---------
<C>                   <C>       <C>        <C>        <C>       <C>         <C>       <C>        <C>       <C>       <C>
2001                  $ 34.05   $ 27.00    $ 33.72    $ 27.30   $ 36.99    $ 29.25    $ 35.59   $ 28.26    $ 36.99   $ 27.00
2000                    34.94     23.06      39.25      30.00     31.50      20.06      28.88     21.00      39.25     20.06
1999                    61.94     49.06      56.94      48.56     52.25      37.00      38.31     29.00      61.94     29.00
</TABLE>


Cash dividends declared per share were:


<TABLE>
<CAPTION>
                                  FIRST               SECOND                THIRD                FOURTH                 YEAR
----------------------- ---------------- -------------------- -------------------- --------------------- --------------------
<C>                               <C>                  <C>                  <C>                   <C>                  <C>
2001                              $0.19                $0.19                $0.19                 $0.19                $0.76
2000                               0.19                 0.19                 0.19                  0.19                 0.76
1999                               0.18                 0.18                 0.18                  0.18                 0.72
</TABLE>



In March 2002 the Board of  Directors  maintained  the  regular  quarterly  cash
dividend of $0.19 per share,  for an  effective  annual rate of $0.76 per share.
The quarterly  rate will be paid on May 10, 2002, to  stockholders  of record on
April 15, 2002.



                                        Albertson's, Inc. 2001 Annual Report 42