UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                         -------------------------------

                                   FORM 10-K/A
                         -------------------------------
                               AMENDMENT NO. 1 TO
              ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

    For the fiscal year ended January 29, 2004 Commission file number 1-6187

                                ALBERTSON'S, INC.
--------------------------------------------------------------------------------

             (Exact name of Registrant as specified in its Charter)

           Delaware                                     82-0184434
---------------------------------        ---------------------------------------
  (State or other jurisdiction           (I.R.S. Employer Identification Number)
of incorporation or organization)

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

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

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

       Title of each class             Name of each exchange on which registered
-----------------------------------    -----------------------------------------
   Common Stock, $1.00 par value                  New York Stock Exchange
                                                  Pacific Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

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

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K (17 CFR section 405) is not contained  herein and will not
be contained,  to the best of  Registrant's  knowledge,  in definitive  proxy or
information  statements  incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. (x)

     Indicate by check mark whether the Registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes  x   No
                                       ---     ---

     The aggregate  market value of the voting stock held by  non-affiliates  of
the  Registrant as of July 31, 2003 (the last  business day of the  Registrant's
most recently completed second fiscal quarter) was approximately $6.4 billion.

     The number of shares of the  registrant's  common  stock,  $1.00 par value,
outstanding as of March 22, 2004 was 367.8 million.

                       Documents Incorporated by Reference

     Listed hereunder are the documents,  any portions of which are incorporated
by  reference  and the  Parts of this Form 10-K into  which  such  portions  are
incorporated:

1.   The Registrant's  definitive proxy statement for use in connection with the
     Annual  Meeting  of  Shareholders  to be held on June 10,  2004 to be filed
     within  120 days  after the  Registrant's  year  ended  January  29,  2004,
     portions of which are  incorporated by reference into Part III of this Form
     10-K.

                                     Page 1
<PAGE>


                                EXPLANATORY NOTE

     Albertson's,  Inc. (the  "Company") is filing this  Amendment No. 1 on Form
10-K/A to its Form 10-K for the fiscal  year ended  January  29,  2004 SOLELY to
correct  a  TYPOGRAPHICAL  ERROR in the  Consolidated  Statement  of Cash  Flows
contained in Item 8. Financial Statements and Supplementary Data. In the process
of converting the document to EDGAR format, the Other long-term liabilities line
item was  inadvertently  replaced with (11), rather than 11.  Although this line
item contained a typographical error, the entirety of the Consolidated Statement
of Cash Flows was accurate, including all subtotals and totals.  This  amendment
also includes  updated Exhibits 31.1 and 31.2  and a currently  dated consent of
the Company's  independent auditors as required by Rule 12b-15 promulgated under
the Securities Exchange Act of 1934. In all other respects,  the Form 10-K filed
as of March 29, 2004 remains unchanged.  This Amendment No. 1 continues to speak
as of the date of the original filing of the Form 10-K and the  Company  has not
updated the disclosures contained therein to reflect any events that occurred at
a later date.

                                     Page 2
<PAGE>


     Item 8 included in the Form 10-K of Albertson's, Inc. filed as of March 29,
2004 is hereby amended and restated in its entirety as follows.

Item 8.  Financial Statements and Supplementary Data.

Albertson's, Inc.
Index to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                                               Page
                                                                                               Number
<S>                                                                                              <C>
Independent Auditors' Report                                                                      4
Consolidated Earnings for the fiscal years ended January 29, 2004, January 30, 2003 and
   January 31, 2002                                                                               5
Consolidated Balance Sheets at January 29, 2004 and January 30, 2003                              6
Consolidated Cash Flows for the fiscal years ended January 29, 2004, January 30, 2003 and
   January 31, 2002                                                                               7
Consolidated Stockholders' Equity for the fiscal years ended January 29, 2004, January 30,
   2003  and January 31, 2002                                                                     8
Notes to Consolidated Financial Statements                                                        9
</TABLE>


                                     Page 3
<PAGE>


INDEPENDENT AUDITORS' REPORT




To 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 29, 2004 and January 30, 2003
and the related  consolidated  statements of earnings,  stockholders' equity and
cash flows for each of the three years in the period  ended  January  29,  2004.
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  29, 2004 and January 30, 2003 and the results of their
operations  and their cash flows for each of the three years in the period ended
January 29, 2004, in conformity with accounting principles generally accepted in
the United States of America.

     As discussed in the notes to the consolidated financial statements,  during
the year ended January 30, 2003,  the Company  changed its methods of accounting
for  goodwill  (Notes 2 and 12) and for  closed  stores  (Note 5) to  conform to
Statements  of Financial  Accounting  Standards No. 142 and 144. Also during the
year ended January 30, 2003,  the Company  changed its method of accounting  for
vendor funds (Notes 2 and 3) to conform to Emerging  Issues Task Force Issue No.
02-16.

     As discussed in Note 25 to the consolidated financial statements,  on March
25, 2004, the Company  entered into a stock purchase  agreement with J Sainsbury
plc and JS USA Holdings Inc. to acquire  all of the outstanding capital stock of
the entities which conduct J Sainsbury plc's U.S. retail grocery business.


Deloitte & Touche LLP
Boise, Idaho
March 25, 2004


                                     Page 4
<PAGE>


ALBERTSON'S, INC.
CONSOLIDATED EARNINGS
<TABLE>
<CAPTION>

For the 52 weeks ended                                            January 29,     January 30,        January 31,
(In millions, except per share data)                                     2004            2003               2002
------------------------------------------------------------- ----------------- --------------- ------------------
<S>                                                                  <C>             <C>                <C>
Sales                                                                $ 35,436        $ 35,626           $ 36,605
Cost of sales                                                          25,306          25,248             26,179
------------------------------------------------------------- ----------------- --------------- ------------------
Gross profit                                                           10,130          10,378             10,426
Selling, general and administrative expenses                            8,822           8,598              8,731
Restructuring (credits) charges                                           (10)            (37)               468
Gain on sale of New England Osco drugstores                                 -               -                (54)
Merger-related credits                                                      -               -                (15)
------------------------------------------------------------- ----------------- --------------- ------------------
Operating profit                                                        1,318           1,817              1,296
Other expenses:
  Interest, net                                                          (409)           (396)              (425)
  Other, net                                                               (3)            (16)                (8)
------------------------------------------------------------- ----------------- --------------- ------------------
Earnings from continuing operations before income taxes                   906           1,405                863
Income tax expense                                                        350             540                367
------------------------------------------------------------- ----------------- --------------- ------------------
Earnings from continuing operations                                       556             865                496
Discontinued operations:
  Operating (loss) income                                                   -             (50)                10
  Loss on disposal                                                          -            (379)                 -
  Income tax (benefit) expense                                              -            (143)                 5
------------------------------------------------------------- ----------------- --------------- ------------------
(Loss) earnings from discontinued operations                                -            (286)                 5
------------------------------------------------------------- ----------------- --------------- ------------------
Earnings  before  cumulative  effect of change in accounting              556             579                501
  principle
Cumulative effect of change in accounting  principle (net of
  tax of $60)                                                               -             (94)                 -
------------------------------------------------------------- ----------------- --------------- ------------------
Net Earnings                                                         $    556        $    485           $    501
============================================================= ================= =============== ==================

Earnings (loss) per share:
Basic
  Continuing operations                                              $   1.51        $   2.18           $   1.22
  Discontinued operations                                                   -           (0.72)              0.01
  Cumulative  effect of change in accounting  principle (net
   of tax of $0.15)                                                         -           (0.24)                 -
------------------------------------------------------------- ----------------- --------------- ------------------
  Net Earnings                                                       $   1.51        $   1.22           $   1.23
============================================================= ================= =============== ==================

Diluted
  Continuing operations                                              $   1.51        $   2.17           $   1.22
  Discontinued operations                                                   -           (0.72)              0.01
  Cumulative  effect of change in accounting  principle (net
   of tax of $0.15)                                                         -           (0.23)                 -
------------------------------------------------------------- ----------------- --------------- ------------------
  Net Earnings                                                       $   1.51        $   1.22           $   1.23
============================================================= ================= =============== ==================

Weighted average common shares outstanding:
  Basic                                                                   368             397                406
  Diluted                                                                 368             399                408
</TABLE>

See Notes to Consolidated Financial Statements

                                     Page 5
<PAGE>


ALBERTSON'S, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                  January 29,        January 30,
(In millions, except par value data)                                                     2004               2003
-------------------------------------------------------------------------- ------------------- ------------------
<S>                                                                                 <C>                 <C>
ASSETS
Current Assets:
  Cash and cash equivalents                                                          $    289           $    162
  Accounts and notes receivable, net                                                      683                647
  Inventories                                                                           3,035              2,973
  Assets held for sale                                                                     69                120
  Prepaid and other                                                                       343                366
-------------------------------------------------------------------------- ------------------- ------------------
    Total Current Assets                                                                4,419              4,268
Land, buildings and equipment, net                                                      9,145              9,029
Goodwill                                                                                1,400              1,399
Intangibles, net                                                                          130                214
Other assets                                                                              300                301
-------------------------------------------------------------------------- ------------------- ------------------
Total Assets                                                                         $ 15,394           $ 15,211
========================================================================== =================== ==================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts payable                                                                   $  1,774           $  1,993
  Salaries and related liabilities                                                        659                615
  Self-insurance                                                                          262                244
  Current maturities of long-term debt and capital lease obligations                      520                119
  Other current liabilities                                                               470                477
-------------------------------------------------------------------------- ------------------- ------------------
    Total Current Liabilities                                                           3,685              3,448
Long-term debt                                                                          4,452              4,950
Capital lease obligations                                                                 352                307
Self-insurance                                                                            469                367
Other long-term liabilities and deferred credits                                        1,055                942
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 -
    368 shares and 372 shares, respectively                                               368                372
  Capital in excess of par                                                                155                128
  Accumulated other comprehensive loss                                                   (109)               (96)
  Retained earnings                                                                     4,967              4,793
-------------------------------------------------------------------------- ------------------- ------------------
    Total Stockholders' Equity                                                          5,381              5,197
-------------------------------------------------------------------------- ------------------- ------------------
Total Liabilities and Stockholders' Equity                                           $ 15,394           $ 15,211
========================================================================== =================== ==================
</TABLE>

    See Notes to Consolidated Financial Statements


                                     Page 6
<PAGE>
<TABLE>
<CAPTION>
ALBERTSON'S, INC.
CONSOLIDATED CASH FLOWS
For the 52 weeks ended                                          January 29,        January 30,        January 31,
(In millions)                                                          2004               2003               2002
----------------------------------------------------------- ----------------- ------------------ ------------------
<S>                                                                  <C>                <C>                <C>
Cash Flows From Operating Activities:
  Net earnings                                                        $ 556              $ 485              $ 501
  Adjustments to reconcile net earnings to net cash
  provided by operating activities:
    Depreciation and amortization                                       969                943                913
    Net deferred income taxes                                           172                100               (129)
    Other noncash charges                                                48                 21                 42
    Stock-based compensation                                             25                 19                 19
    Goodwill amortization                                                 -                  -                 56
    Gain on curtailment of postretirement benefits                      (36)                 -                (36)
    Net gain on asset sales                                             (24)                (9)               (54)
    Restructuring (credits) charges                                      (8)               (16)               424
    Discontinued operations noncash charges                                                365                 54
    Cumulative effect of change in accounting principle                   -                 94                  -
  Changes in operating assets and liabilities:
      Receivables and prepaid expenses                                  (38)                21               (110)
      Inventories                                                       (62)               112                 40
      Accounts payable                                                 (242)              (100)               (68)
      Other current liabilities                                          29                (88)               287
      Self-insurance                                                    120                106                 71
      Unearned income                                                    25                 32                  3
      Other long-term liabilities                                        11                (25)                (4)
----------------------------------------------------------- ----------------- ------------------ ------------------
Net cash provided by operating activities                             1,545              2,060              2,009
----------------------------------------------------------- ----------------- ------------------ ------------------

Cash Flows From Investing Activities:
  Capital expenditures                                               (1,094)            (1,359)            (1,455)
  Proceeds from disposal of land, buildings and
   equipment                                                             72                101                288
  Proceeds from disposal of assets held for sale                        119                578                118
  Other                                                                 (23)                18                (31)
----------------------------------------------------------- ----------------- ------------------ ------------------
Net cash used in investing activities                                  (926)              (662)            (1,080)
----------------------------------------------------------- ----------------- ------------------ ------------------

Cash Flows From Financing Activities:
  Cash dividends paid                                                  (279)              (306)              (309)
  Payments on long-term borrowings                                     (120)              (143)               (89)
  Stock purchases and retirements                                      (108)              (862)                 -
  Proceeds from long-term borrowings                                      9                  -                623
----------------------------------------------------------- ----------------- ------------------ ------------------
  Proceeds from stock options exercised                                   6                 14                 23
  Net commercial paper activity and bank borrowings                       -                  -             (1,153)
----------------------------------------------------------- ----------------- ------------------ ------------------
Net cash used in financing activities                                  (492)            (1,297)              (905)
----------------------------------------------------------- ----------------- ------------------ ------------------
Net Increase in Cash and Cash Equivalents                               127                101                 24
Cash and Cash Equivalents at Beginning of Year                          162                 61                 37
----------------------------------------------------------- ----------------- ------------------ ------------------
Cash and Cash Equivalents at End of Year                              $ 289              $ 162              $  61
=========================================================== ================= ================== ==================

Supplemental Cash Flow Information:
  Cash payments for income taxes, net of refunds                      $ 231              $ 376              $ 403
  Cash payments for interest, net of amounts capitalized                401                390                299
  Noncash investing and financing activities:
     Capitalized lease obligations incurred                              62                 75                 79

</TABLE>

See Notes to Consolidated Financial Statements


                                       Page 7
<PAGE>


ALBERTSON'S, INC.
CONSOLIDATED STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                   Common    Capital      Accumulated
                                   Stock   In Excess            Other                      Total
                               $1.00 Par      Of Par    Comprehensive   Retained   Stockholders'   Comprehensive
 (Dollars in millions)             Value       Value    (Loss) Income   Earnings          Equity          Income
-----------------------------------------------------------------------------------------------------------------
<S>                                 <C>        <C>             <C>       <C>              <C>              <C>
 Balance at February 1, 2001        $405       $ 48            $    -    $ 5,241          $ 5694            $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
                                                                                                            ====
 Net earnings                          -          -                 -        485             485             485
 Exercise of stock options,
   including tax benefits              -         15                 -          -              15               -
 Stock purchases and
   retirements - 35,129,397
   shares                            (35)         -                 -       (827)           (862)              -
 Deferred stock unit plan              -         18                 -          -              18               -
 Directors' stock plan                 -          1                 -          -               1               -
 Dividends                             -          -                 -       (298)           (298)              -
 Minimum pension liability
   adjustment (net of tax of
   $49)                                -          -               (77)         -             (77)            (77)
-----------------------------------------------------------------------------------------------------------------
 Balance at January 30, 2003         372        128               (96)     4,793           5,197             408
                                                                                                            ====
 Net earnings                          -          -                 -        556             556             556
 Exercise of stock options,
   including tax benefits              -          6                 -          -               6               -
 Stock purchases and
   retirements - 5,314,700                                                 (103)           (108)
   shares                             (5)         -                 -                                          -
 Deferred stock unit plan              1         20                 -          -              21               -
 Directors' stock plan                 -          1                 -          -               1               -
 Dividends                             -          -                 -       (279)           (279)              -
 Minimum pension liability
   adjustment (net of tax of                                      (13)                       (13)            (13)
   $8)                                 -          -                            -
-----------------------------------------------------------------------------------------------------------------
 Balance at January 29, 2004        $368       $155            $ (109)   $ 4,967          $5,381            $543
=================================================================================================================
</TABLE>

    See Notes to Consolidated Financial Statements




                                     Page 8
<PAGE>


ALBERTSON'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share data)

1. Business Description and Basis of Presentation
     Albertson's, Inc. ("Albertsons" or 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. Based on sales, the Company is one of the largest retail food
and drug chains in the world.

     As of January  29,  2004 the Company  operated  2,305  stores in 31 states.
Retail  operations  are supported by 17 major Company  distribution  operations,
strategically  located in the  Company's  operating  markets.  The Company  also
operated 228 fuel centers near existing stores.

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

2.  Summary of Significant Accounting Policies
Fiscal  Year End:  The  Company's  fiscal year ends on the  Thursday  nearest to
January 31. As a result,  the Company's fiscal year includes a 53rd week every 5
to 6 years.  Fiscal years 2003,  2002 and 2001 each contained 52 weeks and ended
on January 29, 2004, January 30, 2003 and January 31, 2002, respectively.

Use of  Estimates:  The  preparation  of the  Company's  consolidated  financial
statements,  in conformity with accounting  principles generally accepted in the
United States,  requires  management to make estimates and assumptions.  Some of
these estimates require difficult, subjective or complex judgments about matters
that are  inherently  uncertain.  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 are  located  within the
United States.

Derivatives:  From time to time,  the  Company  enters into  certain  derivative
transactions,  however  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  accumulated  other  comprehensive  income  and  recognized  as  an
adjustment to interest expense over the life of the related debt instrument.

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.

Vendor Funds: The Company receives funds from many of the vendors whose products
the Company  buys for resale in its stores.  These  vendor funds are provided to
increase the  sell-through of the related  products.  The Company receives funds
for a variety of merchandising activities: placement of the vendor's products in
the  Company's  advertising;  placement  of the  vendor's  products in prominent
locations  in the  Company's  stores;  introduction  of new  products  into  the
Company's  distribution system and retail stores;  exclusivity rights in certain
categories that have  slower-turning  products;  and to compensate for temporary
price  reductions  offered  to  customers  on  products  held for sale at retail
stores.  The Company also receives vendor funds for buying  activities,  such as
volume  commitment  rebates and credits  for  purchasing  products in advance of
their  need.  The  terms of  vendor  funds  arrangements  vary in  length,  from
short-term  arrangements  that are  completed  within a  quarter,  to  long-term
arrangements that are expected to be completed within ten years.


                                     Page 9
<PAGE>


     Accounting  for vendor  funds is  discussed  in Emerging  Issues Task Force
"EITF" Issue 02-16: "Accounting by a Customer (Including a Reseller) for Certain
Consideration  Received from a Vendor" ("EITF 02-16"), which the Company adopted
as of the  beginning of 2002.  As a result of this  adoption,  the Company began
recognizing vendor funds for merchandising  activities as a reduction of cost of
sales when the related  products are sold as opposed to the  previous  method of
recognizing these credits as a reduction to cost of sales when the merchandising
activity  was  performed  in  accordance  with  the  underlying  agreements.  In
connection with the  implementation of this new accounting  method,  the Company
recorded a charge in 2002 of $94, net of tax benefit of $60.

     The amount of vendor funds  reducing the  Company's  inventory  ("inventory
offset") as of January 29, 2004 was $155,  an increase of $3 from the  beginning
of 2003.  The vendor funds  inventory  offset as of January 30, 2003 was $152, a
decrease of $6 from the beginning of 2002.  The inventory  offset was determined
by estimating the average  inventory  turnover rates by product category for the
Company's grocery,  general merchandise and lobby departments (these departments
received  over  three-quarters  of the  Company's  vendor  funds in 2003) and by
average  inventory  turnover  rates by department  for the  Company's  remaining
inventory.

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
8  years;  software-3  to  5  years;  leasehold  improvements-10  to  25  years;
intangibles-3  to 10 years;  and assets held under  capitalized  leases-20 to 30
years.

     The  costs of major  remodeling  and  improvements  on  leased  stores  are
capitalized as leasehold  improvements and 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 and
amortized on the straight-line method over the lease 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.  Beginning  in 2002 the  Company
adopted Statement of Financial  Accounting Standards ("SFAS") No. 142, "Goodwill
and Other Intangible Assets", which required goodwill to no longer be amortized,
but instead  tested for  impairment  at least  annually,  or more  frequently if
circumstances indicate potential impairment,  through a comparison of fair value
to its  carrying  value.  Prior  to  2002,  goodwill  was  amortized  using  the
straight-line method over its estimated benefit period of 40 years.

Company Owned Life Insurance:  The Company has purchased life insurance policies
to fund 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 expenses in the Company's Consolidated Earnings.

Impairment of Long Lived Assets and Closed Store Reserves:  The Company assesses
long-lived assets for indicators of impairment based on operational performance.
When events or changes in  circumstances  indicate that the carrying value of an
asset or an asset  group  may not be  recoverable,  the  asset's  fair  value is
compared to its carrying value.  Impairment  losses are recognized as the amount
by which the carrying amounts of the assets exceed their fair values. Asset fair
values are  determined by internal  real estate  specialists  or by  independent
quotes. These estimates can be significantly  impacted by changes in real estate
market conditions, the economic environment and inflation.

     For properties that are closed and are under  long-term  lease  agreements,
the present value of any remaining  liability under the lease,  discounted using
credit risk-free rates and net of expected sublease recovery, is recognized as a
liability  and expensed.  The value of any equipment and leasehold  improvements
related to a closed store is reduced to reflect net recoverable values. Internal
real estate  specialists  estimate the subtenant  income,  future cash flows and
asset recovery values based on their historical  experience and knowledge of (1)
the market in which the store to be closed is  located,  (2) the  results of the
Company's  previous  efforts to dispose  of similar  assets and (3) the  current
economic conditions. The actual cost of disposition for these leases and related
assets is affected by specific real estate markets, the economic environment and
inflation.


                                     Page 10
<PAGE>

Self-Insurance:  The  Company  is  primarily  self-insured  for  property  loss,
workers'  compensation,  automobile liability costs 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. The discount earned by customers by using their preferred loyalty card is
recorded by the Company as a reduction to sales. The only income recognized from
any in-store  rental  arrangement  is the lease amount  received  based on space
occupied.

Procurement,  Distribution and Merchandising Costs: Cost of sales include, among
other things, purchasing,  inbound freight costs, product quality testing costs,
warehousing costs, internal transfer costs,  advertising,  private label program
and  strategic  sourcing  program  costs.  Selling,  general and  administrative
expenses  include,  among other things,  merchandising  planning and  management
costs,  store-based  purchasing  and receiving  costs and  inventory  management
costs.

Store Opening Costs:  Noncapital  expenditures incurred in opening new stores or
remodeling existing stores are expensed in the year in which they are incurred.

Advertising:  Advertising  costs are expensed when  incurred.  In 2003 and 2002,
cooperative  advertising  funds were  accounted for as vendor funds as described
above. In 2001, cooperative  advertising funds from vendors were recorded in the
period which the related  expense was incurred.  Gross  advertising  expenses of
$472,  $527 and $537,  excluding  cooperative  advertising  money  received from
vendors, were included with cost of sales in the Company's Consolidated Earnings
for 2003, 2002 and 2001, respectively.

Stock-Based  Compensation:  The Company  accounts 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. SFAS No. 123,
"Accounting  for  Stock-Based   Compensation"   as  amended  by  SFAS  No.  148,
"Accounting  for  Stock-Based  Compensation  -  Transition  and  Disclosure - An
Amendment  of FASB  Statement  No.  123",  encourages,  but  does  not  require,
companies to record  compensation  cost for  stock-based  employee  compensation
plans at fair value. If the fair value-based  accounting method was utilized for
stock-based compensation,  the Company's pro forma net earnings and earnings per
share would have been as follows:

<TABLE>
<CAPTION>
                                                                        2003         2002        2001
       ------------------------------------------------------- -------------- ------------ -----------
       <S>                                                            <C>          <C>         <C>
       Net Earnings as reported                                       $  556       $  485      $  501
       Add:  Stock-based compensation expense included in
         reported net earnings, net of related tax effects                16           12          11
       Deduct: Total stock-based compensation expense
         determined under fair value based method for all
         awards, net of  related tax effects                             (45)         (44)        (41)
       --------------------------------------------------------- ------------ ------------ -----------
       Pro Forma Net Earnings                                         $  527       $  453      $  471
       ========================================================= ============ ============ ===========

       Basic Earnings Per Share:
         As Reported                                                  $ 1.51       $ 1.22      $ 1.23
         Pro Forma                                                      1.43         1.14        1.16
       ========================================================= ============ ============ ===========

       Diluted Earnings Per Share:
         As Reported                                                  $ 1.51       $ 1.22      $ 1.23
         Pro Forma                                                      1.43         1.14        1.15
       ========================================================= ============ ============ ===========
</TABLE>

     The 2003,  2002 and 2001 pro forma net earnings  resulted from reported net
earnings less pro forma after-tax  compensation expense. The pro forma effect on
net  earnings is not  representative  of the pro forma effect on net earnings in
future  years.  For more  information  on the  method  and  assumptions  used in
determining the fair value of stock-based compensation, see Note 16.


                                     Page 11
<PAGE>

Income  Taxes:  Income  taxes are  accounted  for under the asset and  liability
method.  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.  A valuation  allowance is
recorded for deferred tax assets considered not likely to be realized. The major
temporary differences and their net effect are shown in Note 15 "Income Taxes".

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 primarily related to the minimum pension liability of $21 ($13 net
of tax), $126 ($77 net of tax) and $39 ($23 net of tax) for 2003, 2002 and 2001,
respectively.

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

3.  Cumulative Effect of Change in Accounting Principle
     As discussed in Note 2 "Summary of  Significant  Accounting  Policies",  in
2002 the Company  adopted a new method for  recognizing  vendor funds related to
merchandising  activities.  The  pro  forma  amounts  shown  below  reflect  the
retroactive  application  of the new method as if it had been in effect for 2002
and 2001.

<TABLE>
<CAPTION>
                                                                                      2002           2001
        --------------------------------------------------------------------- ------------- --------------
        <S>                                                                          <C>            <C>
        Net earnings                                                                 $ 579          $ 497

           Earnings per share - basic                                                $1.46          $1.22
           Earnings per share - diluted                                              $1.45          $1.22
</TABLE>

4.  New and Recently Adopted Accounting Standards
     In July 2001 the Financial Accounting  Standards Board ("FASB") issued SFAS
No. 143,  "Accounting for Asset Retirement  Obligations"  ("SFAS No. 143"). This
statement   addresses   financial   accounting  and  reporting  for  obligations
associated with the retirement of tangible  long-lived assets and the associated
asset retirement costs. SFAS No. 143 became effective for the Company on January
31,  2003 and did not  have a  material  effect  on the  Company's  consolidated
financial statements.

     In November 2002 the FASB issued FASB  Interpretation No. 45,  "Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees  of  Indebtedness  of Others"  ("FIN 45").  FIN 45 requires that upon
issuance of a guarantee,  a guarantor  must  recognize a liability  for the fair
value  of an  obligation  assumed  under  a  guarantee.  FIN  45  also  requires
additional  disclosures  by a  guarantor  in its  interim  and annual  financial
statements  about  the  obligations   associated  with  guarantees  issued.  The
recognition  provisions  of FIN 45 are  effective  for  guarantees  issued after
December  31,  2002,  while  the  disclosure  requirements  were  effective  for
financial statements for periods ending after December 15, 2002. The adoption of
FIN 45 did not have a material  effect on the Company's  consolidated  financial
statements.

     In January 2003 the FASB issued FASB Interpretation No. 46,  "Consolidation
of Variable Interest Entities,  an interpretation of ARB No. 51" ("FIN 46"). FIN
46 requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity  investors in the entity do not have the
characteristics  of a controlling  financial  interest or do not have sufficient
equity at risk for the  entity to  finance  its  activities  without  additional
subordinated  financial support from other parties. FIN 46 was effective for all
new variable  interest  entities created or acquired after January 31, 2003. For
variable  interest  entities  created or acquired prior to February 1, 2003, the
provisions of FIN 46 were required to be applied for the first interim or annual
period  beginning  after  June 15,  2003.  In  December  2003  the  FASB  issued
Interpretation  No. 46  (revised  December  2003),  "Consolidation  of  Variable
Interest  Entities,  an interpretation  of ARB No. 51" ("FIN 46(R)").  FIN 46(R)
provides additional  guidance related to identifying  variable interest entities
and determining  whether such entities should be  consolidated.  The adoption of
FIN 46(R) did not have a material effect on the Company's consolidated financial
statements.

     In May 2003 the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments  with  Characteristics  of Both  Liabilities  and Equity" ("SFAS No.
150").  SFAS No. 150 requires that certain  financial  instruments,  which under
previous guidance could be accounted for as equity, be classified as liabilities
in  statements of financial  position.  SFAS No. 150 was effective for financial
instruments  entered into or modified  after May 31, 2003, and was effective for
the Company in the third  quarter.  The  adoption of SFAS No. 150 did not have a
material effect on the Company's consolidated financial statements.


                                     Page 12
<PAGE>


     In November  2003 the EITF  confirmed as a consensus  EITF Issue No. 03-10,
"Application  of EITF Issue No. 02-16,  `Accounting  by a Customer  (Including a
Reseller)  for Certain  Consideration  Received  from a Vendor,' by Resellers to
Sales Incentives  Offered to Consumers by  Manufacturers"  ("EITF 03-10").  EITF
03-10 will not impact the Company's  existing  accounting and reporting policies
for  manufacturers'  coupons that can be presented at any retailer  that accepts
coupons.  For arrangements  with vendors that are entered into or modified after
January 29, 2004, the Company is required to record the vendor  reimbursement as
a  reduction  of cost of sales  (instead  of  sales) if the  coupon  can only be
redeemed  at  a  Company  retail  store.  This  modification  to  the  Company's
accounting  and  reporting  policies  will only  impact  sales and cost of sales
beginning in the  Company's  first quarter of 2004 and is not expected to have a
material impact on sales or cost of sales.

     In December 2003 the FASB issued SFAS No. 132 (Revised  2003),  "Employers'
Disclosure  about Pensions and Other  Postretirement  Benefits - An Amendment of
FASB  Statements  No.  87,  88 and 106"  ("SFAS  No.  132(R)").  This  statement
increases the existing  disclosure  requirements by requiring more details about
pension plan assets, benefit obligations,  cash flows, benefit costs and related
information. The disclosures required by SFAS No. 132(R) are included in Note 17
"Employee Benefit Plans".

5.  Discontinued Operations/Market Exits
     In March 2002 the Company's  Board of Directors  approved  the second phase
of the Company's restructuring plan designed to improve future financial results
and to  drive  future  competitiveness.  This  phase of the  plan  included  the
complete exit of four underperforming markets:  Memphis,  Tennessee;  Nashville,
Tennessee;  Houston,  Texas; and San Antonio,  Texas.  This involved the sale or
closure of 95 stores and two distribution  centers and the reduction of division
offices  from 15 to 11.  The  facilities  identified  for sale or  closure  were
evaluated  for lease  liability and asset  impairment,  including  goodwill,  in
accordance with the Company's policy. The 2001 and 2002 operating activities for
these 95 stores, two distribution  centers and the related division offices have
been  classified  in  Discontinued  operations:  Operating  (loss) income in the
accompanying Consolidated Earnings.

     The discontinued  operations generated sales of $290 and $1,326 in 2002 and
2001, respectively,  and an operating loss of $50 and operating profit of $10 in
2002 and 2001,  respectively.  The discontinued  operations were not material to
the 2003 Consolidated Earnings.  The loss from discontinued  operations was $286
in 2002 and consisted of a loss from  operations  of $50 and asset  impairments,
lease  settlements  and other costs of $379, net of $143 in income tax benefits.
The table below details the activity associated with the disposition:

<TABLE>
<CAPTION>
                                                      NONCASH                               TOTAL  CHARGES
                                                      CHARGES               ACCRUALS              (CREDITS)
                                            -------------------    -------------------    ------------------
<S>                                                      <C>                 <C>                   <C>
2002 Activity
   Asset impairments                                     $401                $     -               $   401
   Lease settlements                                        -                     26                    26
   Severance and outplacement                               -                     23                    23
   Other                                                    -                      2                     2
   Gain on asset sales                                    (63)                     -                   (63)
   Favorable lease settlements                              -                    (10)                  (10)
                                                                                          ------------------
    Loss on disposal                                                                                  $379
                                                                                          ==================
   Cash payments during 2002                                                     (30)
                                                                   -------------------
    Reserve balance at January 30, 2003                                           11

2003 Activity
   Unfavorable lease settlements                                                   1                     1
                                                                                          ------------------
    Loss on disposal                                                                               $     1
                                                                   -------------------    ==================
   Cash payments during 2003                                                      (4)
                                                                   -------------------
    Reserve balance at January 29, 2004                                      $     8
                                                                   ===================
</TABLE>

     The  reserve  balance of $8 at January 29, 2004 and $11 at January 30, 2003
are included in other current liabilities in the Company's  Consolidated Balance
Sheet.


                                     Page 13
<PAGE>


     Assets related to  discontinued  operations are recorded at their estimated
net realizable  value,  less selling costs, of $8 as of January 29, 2004 and are
reported as assets held for sale in the Company's  Consolidated  Balance  Sheet.
These assets include land, buildings,  equipment and leasehold  improvements and
are being  actively  marketed.  As of January 30,  2003,  all 95 stores and both
distribution  centers were closed. The Company had either sold or terminated the
leases  related  to 80 of the 95  stores  and both  distribution  centers  as of
January 29, 2004.

     2003  unfavorable  lease  settlement  charges are  included  in  continuing
operations as part of selling, general and administrative expenses.

     Other consists of amounts paid in connection with notification  regulations
and negotiated contract terminations.

6.  Restructuring
     In the first half of 2001, the Company initiated a profitability  review of
all of its retail  stores,  utilizing a methodology  based on return on invested
capital.  The Company also evaluated its division  management  structure and the
efficiency of its transaction processing departments. Based on these reviews, in
July 2001 the Company committed to the following  restructuring  activities:  1)
close and dispose of 165 underperforming  stores in 25 states; 2) eliminate four
of the then existing 19 division offices; 3) sell a store fixture  manufacturing
operation;  4) centralize  certain  transaction  processing  functions in Boise,
Idaho; and 5) reduce general office head count.

     These  restructuring   activities  called  for  the  elimination  of  1,341
managerial and administrative  positions  (excluding store level  terminations).
The  restructuring  charge  recorded in 2001  included the  following:  employee
severance  and  outplacement  costs of $44;  asset  impairments  of $361;  lease
termination costs of $57; and other costs of $6.

     In 2001 and 2002,  respectively,  80 and 82 stores  were closed or sold and
995 and 297 managerial and  administrative  employees were terminated.  In 2002,
management revised the planned restructuring  activities to retain the Company's
store  fixture  manufacturing  operation,  as  it  was  determined  to  be  more
cost-effective  than  purchasing  like-fixtures  from  external  sources  in the
future; to retain one store due to improved operating  performance;  and to halt
one  part of the  transaction  processing  consolidation  due to a  decision  to
replace the Company's  human  resource  information  systems (HRIS) by 2006. All
remaining stores in this restructuring plan were sold or closed by 2003.


                                     Page 14
<PAGE>


     The following table presents the pre-tax  restructuring credits and charges
and the related  restructuring  reserves included in the Company's  Consolidated
Balance Sheets:

<TABLE>
<CAPTION>
                                                      NONCASH               ACCRUALS        TOTAL  CHARGES
                                                      CHARGES                                     (CREDITS)
                                            -------------------    -------------------    ------------------
<S>                                                     <C>                  <C>                   <C>
 2001 Activity
   Asset impairments                                    $ 361                $     -               $   361
   Lease settlements                                        -                     57                    57
   Severance and outplacement                               -                     44                    44
   Other                                                    -                      6                     6
                                                                                          ------------------
      Restructuring charges                                                                        $   468
                                                                                          ==================
   Cash payments during 2001                                                     (46)
                                                                   -------------------
      Reserve balance at January 31, 2002                                         61

2002 Activity
   Retain store fixtures operation                         (3)                    (2)              $    (5)
   Halt part of consolidation - HRIS                        -                     (2)                   (2)
   Gains on asset sales                                   (17)                     -                   (17)
   Favorable lease settlements                              -                    (14)                  (14)
   Severance and outplacement                               -                      2                     2
   Other                                                    -                     (1)                   (1)
                                                                                          ------------------
      Restructuring credits                                                                        $   (37)
                                                                                          ==================
   Cash payments during 2002                                                     (16)
                                                                   -------------------
      Reserve balance at January 30, 2003                                         28

2003 Activity
   Gains on asset sales                                    (8)                     -                  $ (8)
   Other                                                   (2)                     -                    (2)
                                                                                          ------------------
      Restructuring credits                                                                        $   (10)
                                                                                          ==================
    Cash payments during 2003                                                     (9)
                                                                   -------------------
      Reserve balance at January 29, 2004                                    $    19
                                                                   ===================
</TABLE>

     The reserve balances of $19 at January 29, 2004 and $28 at January 30, 2003
are included in other current liabilities in the Company's  Consolidated Balance
Sheets.  The related  assets are recorded at their  estimated  fair value,  less
selling  costs,  of $13 as of January 29, 2004,  and reported as assets held for
sale in the Company's Consolidated Balance Sheet.

                                     Page 15
<PAGE>


7.  Closed Store Reserves
     The following  table shows the pre-tax  expense and related  reserves,  for
closed stores and other surplus property:

<TABLE>
<CAPTION>
                                                        NONCASH               ACCRUALS                 TOTAL
                                                                                                     CHARGES
                                                        CHARGES                                     (CREDITS)
                                               ------------------    -------------------    ------------------
<S>                                                      <C>                    <C>                   <C>
Reserve balance at February 1, 2001                                             $   22

2001 Activity
   Asset impairments                                     $   44                      -                $   44
   Lease terminations                                         -                     27                    27
   Favorable lease termination                                -                     (2)                   (2)
   Gains on disposition                                      (2)                     -                    (2)
                                                                                            ------------------
     Closed store charge                                                                              $   67
                                                                                            ==================
   Cash payments during 2001                                                        (8)
                                                                     -------------------
     Reserve balance at January 31, 2002                                            39

2002 Activity
   Asset impairments                                         23                      -                $   23
   Lease terminations                                         -                      8                     8
   Favorable lease termination                                -                     (1)                   (1)
   Loss on disposition                                        5                      -                     5
                                                                                            ------------------
     Closed store charge                                                                              $   35
                                                                                            ==================
   Cash payments during 2002                                                       (16)
                                                                     -------------------
     Reserve balance at January 30, 2003                                            30

2003 Activity
   Asset impairments                                         27                      -                $   27
   Lease terminations                                         -                      5                     5
   Favorable lease termination                                -                     (6)                   (6)
   Gains on disposition                                     (13)                     -                   (13)
                                                                                            ------------------
     Closed store charge                                                                              $   13
                                                                                            ==================
   Cash payments during 2003                                                        (9)
                                                                     -------------------
     Reserve balance at January 29, 2004                                        $   20
                                                                     ===================
</TABLE>

     As of January  29,  2004,  $6 of the  reserve  balance  was  included  with
accounts  payable  and the  remaining  $14 was  included  with  other  long-term
liabilities and deferred  credits in the Company's  Consolidated  Balance Sheet.
The  related  assets are  recorded  at their  estimated  fair value of $43 as of
January 29, 2004,  less selling  costs,  and reported as assets held for sale in
the Company's Consolidated Balance Sheet.

     During  fiscal  2001,  the   restructuring   plan   (discussed  in  Note  6
"Restructuring") included actions to accelerate the disposal of surplus property
that included  terminating  leases through  negotiated buyouts and selling owned
properties through auctions.  As a result of these actions, the Company incurred
$51 of  pre-tax  restructuring  adjustments.  These  charges  were  included  in
selling,  general and administrative expenses in the Company's 2001 Consolidated
Earnings.

     In January  2002 the Company sold a total of 80 Osco  drugstores  in Maine,
Massachusetts and New Hampshire for $235 which resulted in a $54 pre-tax gain.

8.  Merger-related Credits
     Merger-related  (credits)  charges  for  2001  represent  a  credit  of $15
associated  with the sale of an  asset  for an  amount  that  was  greater  than
originally estimated.

                                     Page 16
<PAGE>



9.  Accounts and Notes Receivable
     Accounts and notes receivable, net, consisted of the following:

<TABLE>
<CAPTION>
                                                                          January 29,        January 30,
                                                                                 2004               2003
-------------------------------------------------------------------- ----------------- ------------------
<S>                                                                            <C>                <C>
Trade and other accounts receivable                                            $  693             $  664
Current portion of notes receivable                                                 8                  6
Allowance for doubtful accounts                                                   (18)               (23)
-------------------------------------------------------------------- ----------------- ------------------
                                                                               $  683             $  647
==================================================================== ================= ==================
</TABLE>

10.  Inventories
     Approximately  96%  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 $576 and $589 higher at the end of 2003
and 2002,  respectively.  Net  earnings  (basic and diluted  earnings per share)
would have been  lower by $8  ($0.02)  in 2003,  lower by $2 ($0.01) in 2002 and
higher by $3 ($0.01) in 2001. The replacement cost of inventories valued at LIFO
approximates FIFO cost.

     During  2003 and 2002,  inventory  quantities  in certain  LIFO layers 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
2003 and 2002 purchases.  As a result, cost of sales decreased by $3 in 2003, $4
in 2002 and $10 in 2001. This increased net earnings (basic and diluted earnings
per  share) by $2  ($0.01)  in 2003,  by $2 ($0.01) in 2002 and by $6 ($0.01) in
2001.

11.  Land, Buildings and Equipment
     Land, buildings and equipment, net, consisted of the following:
<TABLE>
<CAPTION>
                                                                    January 29,           January 30,
                                                                           2004                  2003
---------------------------------------------------------- --------------------- ---------------------
<S>                                                                      <C>                   <C>
Land                                                                     $1,936                $1,939
Buildings                                                                 5,978                 5,713
Fixtures and equipment                                                    5,928                 5,561
Leasehold improvements                                                    1,728                 1,619
Capitalized leases                                                          420                   355
---------------------------------------------------------- --------------------- ---------------------
                                                                         15,990                15,187
Accumulated depreciation                                                 (6,735)               (6,060)
Accumulated amortization on capital leases                                 (110)                  (98)
---------------------------------------------------------- --------------------- ---------------------
                                                                         $9,145                $9,029
========================================================== ===================== =====================
</TABLE>

     Depreciation  expense  was  $931,  $901 and $869 for  2003,  2002 and 2001.
Amortization  expense of capital leases was $18, $18 and $19 for 2003,  2002 and
2001, respectively.

12.  Goodwill and Other Intangible Assets
     The Company adopted SFAS No. 142,  "Goodwill and Other Intangible  Assets,"
in 2002. As a result, the Company did not incur any expense for the amortization
of goodwill in 2003 or 2002. The pretax expense for the amortization of goodwill
included in continuing operations was $56 in 2001. Upon adoption,  the aggregate
of the  goodwill  allocated  to the  stores in each  reporting  unit  became the
reporting units' goodwill  balance.  In order to determine if a reporting unit's
goodwill was impaired,  a  combination  of internal  analysis,  focusing on each
reporting  unit's  implied  EBITDA  multiple  and  estimates  of fair value from
independent valuation specialists were used. Based on these analyses,  there was
no impairment of goodwill at the adoption date. Subsequently,  during the fourth
quarter of 2002 and 2003, the Company completed its annual impairment review and
determined  that there was no impairment.  The fair value estimates could change
in the future depending on internal and external factors,  including the success
of strategic sourcing initiatives, labor cost controls and competitive activity.



                                     Page 17
<PAGE>


     The following  table  presents the Company's 2001 net earnings and earnings
per share as if SFAS No. 142 had been adopted as of the beginning of fiscal year
2001:
<TABLE>
<CAPTION>
                                                            January 29, 2004   January 30, 2003   January 31, 2002
                                                            ----------------- ------------------ ------------------
     <S>                                                               <C>                <C>                <C>
     Net earnings, as reported                                         $ 556              $ 485              $ 501
      Add back goodwill amortization, net of tax                           -                  -                 56
                                                            ----------------- ------------------ ------------------
    Adjusted net earnings                                              $ 556              $ 485              $ 557
                                                            ================= ================== ==================
    Basic EPS                                                          $1.51              $1.22              $1.23
      Add back goodwill amortization, net of tax                          -                   -               0.14
                                                            ----------------- ------------------ ------------------
      Adjusted Basic EPS                                               $1.51              $1.22              $1.37
                                                            ================= ================== ==================
    Diluted EPS                                                        $1.51              $1.22              $1.23
      Add back goodwill amortization, net of tax                           -                  -               0.14
                                                            ----------------- ------------------ ------------------
      Adjusted Diluted EPS                                             $1.51              $1.22              $1.37
                                                            ================= ================== ==================
</TABLE>

     In 2003  there  was no  material  change  in the  net  carrying  amount  of
goodwill.  In connection with the complete exit of certain markets  discussed in
Note 5, the Company wrote off $68 of goodwill, net in 2002. The goodwill written
off  arose  from the  original  acquisition  of the  operating  assets  in those
markets.

     The carrying amount of intangible assets was as follows:
<TABLE>
<CAPTION>
                                                               January 29, 2004    January 30, 2003
                                                            -------------------- -------------------
    <S>                                                                  <C>                 <C>
    Amortizing:
       Favorable acquired operating leases                               $  221              $  231
       Customer lists and other contracts                                    56                  53
                                                            -------------------- -------------------
                                                                            277                 284
    Accumulated amortization                                               (186)               (173)
                                                            -------------------- -------------------
                                                                             91                 111
    Non-Amortizing:
       Liquor licenses                                                       39                  39
       Pension related intangible assets                                      -                  64
                                                            -------------------- -------------------
                                                                             39                 103
                                                            -------------------- -------------------
                                                                         $  130              $  214
                                                            ==================== ===================
</TABLE>

     Straight line amortization  expense for intangibles was $20, $24 and $25 in
2003, 2002 and 2001,  respectively.  Amortizing intangible assets have remaining
useful  lives from 2 to 38 years.  Projected  amortization  expense for existing
intangible  assets is: $19, $12, $7, $6 and $5, for 2004,  2005,  2006, 2007 and
2008, respectively.


                                     Page 18
<PAGE>


13.  Indebtedness
     Long-term debt consisted of the following  (borrowings are unsecured unless
indicated):
<TABLE>
<CAPTION>
                                                                                 January 29,    January 30,
                                                                                        2004           2003
----------------------------------------------------------------------------- --------------- --------------
<S>                                                                                   <C>            <C>
8.0% Debentures due May 1, 2031                                                       $  400         $  400
7.25% Notes due May 1, 2013                                                              200            200
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
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 2008 through 2028, average interest rate of 6.9%                  145            245
Notes  due  July  3,  2004,   average  interest  rate  of  6.95%  and  6.7%,
respectively                                                                             200            200
Industrial   revenue  bonds,   average  interest  rate  of  5.9%  and  5.9%,
   respectively due October 1, 2004 through December 15, 2011                              5              8
Secured  mortgage notes and other notes payable,  average  interest rates of
   6.9%  and 9.1%, respectively due 2004 through 2019                                     24             18
----------------------------------------------------------------------------- --------------- --------------
                                                                                       4,958          5,055
Current maturities                                                                      (506)          (105)
----------------------------------------------------------------------------- --------------- --------------
                                                                                      $4,452         $4,950
============================================================================= =============== ==============
</TABLE>

     The Company had three revolving  credit  facilities  totaling $1,400 during
2003.  The first  agreement,  a 364-day  revolving  credit  facility  with total
availability  of $100 was due to  expire in  February  2004 but  renewed  for an
additional  year to expire in February 2005. The second  agreement,  a revolving
credit facility with total availability of $350 was set to expire in March 2004,
but was  extended  through  July 2004.  The  Company  expects  to  replace  this
agreement.  The third agreement, a five-year facility for $950, expires in March
2005. 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  $3,000 and a fixed  charge  coverage,  as
defined, of no less than 2.7 times. As of January 29, 2004 and January 30, 2003,
the Company was in compliance with these requirements.  However, due to goodwill
that  is  expected  to be  generated  as a  result  of  the  acquisition  of the
operations of J Sainsbury  plc to be acquired by the Company  (Shaw's) (see Note
25 "Subsequent Events" for further discussion of the anticipated  acquisition of
Shaw's) the Company will have to obtain a prospective waiver of the consolidated
tangible net worth covenant under these agreements.  All of the revolving 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, as long
as the Company is in  compliance  with the terms and  conditions  of the related
agreements.  No borrowings were  outstanding  under the credit  facilities as of
January 29, 2004 or January 30, 2003.

     The Company filed a shelf  registration  statement  with the Securities and
Exchange  Commission,  which became  effective on February 13, 2001 ("2001 Shelf
Registration") 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  Shelf
Registration.  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.


                                     Page 19
<PAGE>

     The Company has pledged  real estate with a cost of $36 as  collateral  for
mortgage  notes which are payable on various  schedules,  including  interest at
rates ranging from 6.8% to 10.7%. The notes mature from 2004 to 2014.

     Medium-term  notes of $30 due July 2027  contain a  put option  that  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 contains a put option that  would
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.

    Net interest expense was as follows:
<TABLE>
<CAPTION>
                                                                      2003         2002          2001
   ----------------------------------------------------------- ------------ ------------ -------------
   <S>                                                              <C>          <C>           <C>
   Long-term debt                                                   $  374       $  377        $  401
   Capitalized leases                                                   36           35            30
   Capitalized interest                                                (16)         (27)          (23)
   ----------------------------------------------------------- ------------ ------------ -------------
   Interest expense                                                    394          385           408
   Bank service charges, net of interest income                         15           11            17
   ----------------------------------------------------------- ------------ ------------ -------------
                                                                    $  409       $  396        $  425
   =========================================================== ============ ============ =============
</TABLE>

     The scheduled aggregate maturities of long-term debt outstanding at January
31, 2004, are summarized as follows: $506 in 2004, $206 in 2005, $2 in 2006, $12
in 2007,  $62 in 2008 and $4,170  thereafter.  These  figures do not include the
potential accelerations due to put options.

14.  Capital Stock
     On December 2, 1996,  the Board of Directors  adopted a stockholder  rights
plan, which was amended on August 2, 1998, March 16, 1999 and September 26, 2003
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 per one  one-thousandth  share.  Subject  to certain
exceptions,  the rights will become  exercisable  for shares of preferred  stock
upon the earlier of (1) 10 days following a public announcement that a person or
group of affiliated or associated persons has acquired, or obtained the right to
acquire, beneficial ownership of 15% or more of the outstanding shares of common
stock and (2) 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  (collectively,  the persons or groups
referenced in (1) and (2) are referred to as an "Acquiring Person").

     Under the plan,  subject to certain  exceptions,  if any person  becomes an
Acquiring  Person,  each  right will then  entitle  its holder as defined by the
plan,  other  than  such  Acquiring  Person,  upon  payment  of the $160 per one
one-thousandth  share 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.

     During 2002,  the Company  purchased and retired 35.1 million shares of the
Company's common stock for $862, at an average price of $24.54 per share. During
2003,  the Company  purchased  and retired  5.3 million  shares for $108,  at an
average price of $20.26 per share.  On December 5, 2003,  the Board of Directors
reauthorized a program authorizing management,  at their discretion, to purchase
and retire up to $500 of the Company's  common stock through  December 31, 2004.
The Company may continue or, from time to time suspend,  purchasing shares under
its stock  purchase  program  without  notice,  depending on  prevailing  market
conditions, alternate uses of capital and other factors.


                                     Page 20
<PAGE>


15.  Income Taxes
     Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
                                                                          January 29,      January 30,
                                                                                 2004             2003
----------------------------------------------------------------------- --------------- ----------------
<S>                                                                             <C>              <C>
Deferred tax assets:
  Compensation and benefits                                                     $ 301            $ 317
  Self-insurance                                                                  149              216
  Basis in fixed assets                                                           157              184
  Unearned income                                                                  33               17
  Other, net                                                                       65               69
  Valuation allowance                                                              (3)
                                                                                                    -
----------------------------------------------------------------------- --------------- ----------------
Total deferred tax assets                                                         702              803
----------------------------------------------------------------------- --------------- ----------------
Deferred tax liabilities:
  Basis in fixed assets and capitalized leases                                   (602)            (537)
  Inventories                                                                     (83)             (82)
  Compensation and benefits                                                       (23)             (51)
  Self-insurance                                                                  (14)              -
  Other, net                                                                      (37)             (25)
----------------------------------------------------------------------- --------------- ----------------
Total deferred tax liabilities                                                   (759)            (695)
----------------------------------------------------------------------- --------------- ----------------
Net deferred tax (liabilities) assets                                           $ (57)           $ 108
======================================================================= =============== ================
</TABLE>

     The change in net deferred tax assets includes total  adjustments of $7 for
the year  ended  January  29,  2004  related  to stock  units of $(1) and  other
comprehensive income of $8.

     The Company has federal and state net operating  loss  carryforwards  of $1
and $159, respectively, which will expire in years 2005 through 2021.

     Annual  tax  provisions  include  amounts  considered   sufficient  to  pay
assessments that may result from examination of prior year tax returns; however,
the  amount  ultimately  paid  upon  resolution  of  issues  raised  may  differ
materially  from the amount  accrued.  These accrued  amounts are  classified in
other long term liabilities based on expected settlement dates.

     Income  tax  expense  related  to  continuing  operations  consists  of the
following:
<TABLE>
<CAPTION>
                                                                                2003         2002        2001
        ---------------------------------------------------------------- ------------ ------------ -----------
        <S>                                                                    <C>          <C>         <C>
        Current:
           Federal                                                             $ 159        $ 448       $ 454
           State                                                                  19           52          50
        ---------------------------------------------------------------- ------------ ------------ -----------
                                                                                 178          500         504
        Deferred:
           Federal                                                               154           36        (124)
           State                                                                  18            4         (13)
        ---------------------------------------------------------------- ------------ ------------ -----------
                                                                                 172           40        (137)
        ---------------------------------------------------------------- ------------ ------------ -----------
                                                                               $ 350        $ 540       $ 367
        ================================================================ ============ ============ ===========
</TABLE>

     The  reconciliations  between  the  federal  statutory  tax  rate  and  the
Company's effective tax rates are as follows:
<TABLE>
<CAPTION>
                                          2003       Percent      2002       Percent        2001       Percent
----------------------------------- ----------- ------------- ---------- ------------- ---------- -------------
<S>                                      <C>            <C>      <C>            <C>       <C>             <C>
Taxes computed at statutory rate         $ 317          35.0     $ 492          35.0      $ 302           35.0
State income taxes net of federal
  income tax benefit                        36           4.0        56           4.0         37            4.2
Goodwill amortization                        -             -         -             -         27            3.1
Other                                       (3)         (0.4)       (8)         (0.6)         1            0.3
----------------------------------- ----------- ------------- ---------- ------------- ---------- -------------
                                         $ 350          38.6     $ 540          38.4      $ 367           42.6
=================================== =========== ============= ========== ============= ========== =============
</TABLE>
                                     Page 21
<PAGE>


16.  Stock Options and Stock Awards
     At January 29,  2004,  Albertsons  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 (Albertson's,  Inc. 1995 Amended and Restated Stock-Based
Incentive  Plan)  (the  "1995  Plan").  Under  the 1995  Plan,  approved  by the
stockholders  most recently in 2001,  options to purchase the  Company's  common
stock and stock  awards may be  granted  to  officers,  key  employees,  special
advisors (as defined in the 1995 Plan) and non-employee  members of the Board of
Directors.  During  2001,  the 1995 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.

Deferrable or Deferred  Stock Units:  From time to time,  deferrable or deferred
stock units with dividend  equivalents  paid in cash quarterly are awarded under
the 1995 Plan to key  officers  of the  Company.  Deferred  stock units are also
awarded to non-employee members of the Board of Directors.

     Grants  of  1,672,398  units  were made  during  2003 to key  officers  and
non-employee directors of the Company, of which 1,046,548 and 356,885 units will
vest at a rate of 33% per year  after  the  first two years and 20% per year for
the first five years,  respectively,  and be  distributed in a manner elected by
the participant on a date after the  participant  ceases to be an officer of the
Company,  253,500  units  will vest at a rate of 20% per year for the first five
years and be distributed in stock at each vesting date unless otherwise deferred
and 15,465 units were fully vested at their grant date.

     Grants  of  1,080,441  units  were made  during  2002 to key  officers  and
non-employee  directors of the Company,  of which  432,841  units will vest at a
rate of 20% per year for the first  five  years and be  distributed  in a manner
elected  by the  participant  on a date  after the  participant  ceases to be an
officer of the  Company,  638,540  units will vest at a rate of 20% per year for
the first five years and be  distributed  in stock at each  vesting  date unless
otherwise deferred and 9,060 units were fully vested at their grant date.

     Grants  of  1,089,104  units  were made  during  2001 to key  officers  and
non-employee directors of the Company of which 788,670 units will vest over time
and be distributed  in a manner  elected by the  participant on a date after the
participant ceases to be an officer of the Company, 186,217 units will vest at a
rate of 20% per year for the first  five  years and be  distributed  in stock at
each vesting date unless otherwise deferred and 14,217 were fully vested at
their grant date.

     Compensation  expense  for  deferred  stock  units of $25,  $19 and $19 was
recorded in selling, general and administrative expenses in 2003, 2002 and 2001,
respectively.

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 29, 2004        January 30, 2003        January 31, 2002
                                          ----------------------- ----------------------- -----------------------
                                             Shares        Price     Shares        Price     Shares        Price
        --------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
        <S>                                  <C>         <C>         <C>         <C>         <C>         <C>
        Outstanding at beginning of year     30,245      $ 31.41     28,045      $ 33.06     25,290      $ 32.79
        Granted                               7,169        20.35      5,312        23.06      6,406        32.64
        Exercised                              (295)       21.72       (722)       23.99     (1,303)       22.71
        Forfeited                            (1,955)       32.14     (2,390)       34.43     (2,348)       34.70
        --------------------------------- ----------- ----------- ----------- ----------- ----------- -----------

        Outstanding at end of year           35,164      $ 29.20     30,245      $ 31.41     28,045      $ 33.06
        ================================= =========== =========== =========== =========== =========== ===========
        Options exercisable at end of
        year                                 16,626      $ 34.08     13,523      $ 35.04     11,414      $ 35.67
        ================================= =========== =========== =========== =========== =========== ===========
</TABLE>

     As of January 29, 2004, 9 million shares of the Company's common stock were
reserved for future grants of stock options and stock awards.


                                     Page 22
<PAGE>


     The following table summarizes options  outstanding and options exercisable
as of January 29, 2004 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   Average              Shares    Average
       Option Price Per Share           Outstanding          Life     Price         Exercisable      Price
       ----------------------------- --------------- ------------- ---------    ---------------- ----------
       <S>                                   <C>              <C>   <C>                   <C>      <C>
       $ 20.23  - $ 22.52                    17,062           8.3   $ 21.18               3,970    $ 21.72
         23.52  -   34.87                    12,160           6.7     31.55               7,282      31.26
         35.00  -   45.94                     1,971           2.9     39.86               1,961      39.87
         47.00  -   51.19                     3,971           5.4     51.14               3,413      51.13
       ----------------------------- --------------- ------------- ---------    ---------------- ----------
       $ 20.23  - $ 51.19                    35,164           7.1   $ 29.20              16,626    $ 34.08
       ============================= =============== ============= =========    ================ ==========
</TABLE>

     The  weighted  average fair value at date of grant for  Albertsons  options
granted  during  2003,  2002 and 2001 was $6.44,  $6.80 and  $10.16 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>
                                                                     2003             2002          2001
    ------------------------------------------------------- --------------- ---------------- -------------
    <S>                                                              <C>              <C>           <C>
    Expected life (years)                                             5.7              5.7           5.8
    Risk-free interest rate                                          3.56%            3.15%         3.62%
    Volatility                                                       39.4%            38.0%         34.8%
    Dividend yield                                                   3.74%            3.38%         2.33%
</TABLE>

17.  Employee Benefit Plans and Collective Bargaining Agreements
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 unless
the   collective    bargaining   agreement   provides   for   participation   in
Company-sponsored  plans.  The Company sponsors both defined benefit and defined
contribution plans.

     The Albertsons  Salaried  Employees  Pension Plan and Albertsons  Employees
Corporate Pension Plan are funded, qualified,  defined benefit,  noncontributory
plans for eligible Albertsons 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.  In 1999,  in
conjunction   with   the   authorization   of  ASRE   (described   later),   the
Company-sponsored  defined  benefit  plans  were  amended  to close the plans to
future new  entrants,  with the exception of certain  union  employees  based on
current contracts. 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's funding policy for the defined benefit
plans is to  contribute  the minimum  contribution  allowed  under the  Employee
Retirement  Income  Security  Act  ("ERISA"),   with   consideration   given  to
contributing  larger amounts in order to be exempt from Pension Benefit Guaranty
Corporation  ("PBGC")  variable  rate  premiums  and/or  participant  notices of
under-funding.  The Company will  recognize  contributions  in  accordance  with
applicable regulations, with consideration given to recognition for the earliest
plan year permitted.

     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 that supplement those provided by the Company's
other retirement plans.

     The Company  offers health and life  insurance to retirees  under  multiple
programs.  The terms of these plans vary based on employment history and date of
retirement.  For certain pre-1991  retirees,  the Company  provides  coverage at
little or no cost to the  retirees.  For other  current  retirees,  the  Company
provides a fixed dollar  contribution and retirees pay contributions to fund the
remaining  cost.  On  December  5,  2003,  the  Board of  Directors  approved  a
curtailment of retirement  medical benefits for all non-retired  employees.  For
retirees  after June 1, 2004  the fixed  dollar  employer  contribution  will be
reduced to $0 and retiree contributions will fund the entire benefit. The impact
of the curtailment for 2003 was a gain of $36, recorded in selling,  general and
administrative expenses in Consolidated Earnings.

     The Company uses its fiscal year-end date as the  measurement  date for its
Company-sponsored  defined  benefit  pension  plans and  postretirement  benefit
plans.


                                     Page 23
<PAGE>


     The  following  table sets forth the  obligations  and funded status of the
Company-sponsored  defined benefit pension plans and  postretirement  health and
life insurance benefit plans:
<TABLE>
<CAPTION>
                                                        Pension Benefits                    Other Benefits
                                                 January 29,        January 30,      January 29,       January 30,
                                                        2004              2003              2004              2003
        ---------------------------------------- ------------- -- -------------- -- -------------- -- --------------
        <S>                                            <C>               <C>               <C>              <C>
        Change in benefit obligation:
           Benefit obligation at beginning of          $ 656             $ 567             $  69             $  71
            year
           Service cost                                   13                12                 2                 3
           Interest cost                                  40                37                 4                 4
           Curtailment gain                                -                 -               (36)               (6)
           Plan participants' contributions                -                 -                12                12
           Actuarial loss (gain)                          42                59                (6)               (1)
           Benefits paid                                 (18)              (19)              (16)              (14)
        ---------------------------------------- ------------- -- -------------- -- -------------- -- --------------
        End of year benefit obligation                   733               656                29                69
        ---------------------------------------- ------------- -- -------------- -- -------------- -- --------------
        Change in plan assets:
           Fair value of plan assets at
            beginning of year                            398               466                 -                 -
           Actual return on plan assets                  104               (51)                -                 -
           Employer contributions                         21                 2                 4                 2
           Plan participants' contributions                -                 -                12                12
           Benefits paid                                 (18)              (19)              (16)              (14)
        ---------------------------------------- ------------- -- -------------- -- -------------- -- --------------
        Fair  value  of plan  assets  at end of          505               398                 -                 -
        year
        ---------------------------------------- ------------- -- -------------- -- -------------- -- --------------
        Funded status                                   (228)             (258)              (29)              (69)
        Unrecognized net actuarial loss (gain)           252               304               (18)              (13)
        Unrecognized prior service benefit               (51)              (64)                -                 -
        ---------------------------------------- ------------- -- -------------- -- -------------- -- --------------
        Net amount recognized                          $ (27)            $ (18)            $ (47)            $ (82)
        ======================================== ============= == ============== == ============== == ==============
</TABLE>

Amounts recognized in the statement of financial position consist of:
<TABLE>
<CAPTION>
                                               Pension Benefits                      Other Benefits
                                         January 29,            January      January 29,        January 30,
                                                2004         30,  2003              2004               2003
                                        --------------     -------------    --------------     --------------
<S>                                            <C>               <C>               <C>                <C>
        Accrued benefit liability              $(212)            $(246)            $ (47)             $ (82)
        Intangible assets                          -                64                 -                  -
        Accumulated
        other

          comprehensive income,
          net of taxes                           112                99                 -                  -
        Deferred income taxes                     73                65                 -                  -
                                        --------------     -------------    --------------     --------------
        Net amount recognized                  $ (27)            $ (18)            $ (47)             $ (82)
                                        ==============     =============    ==============     ==============
</TABLE>

     The  accumulated  benefit  obligation for all defined benefit pension plans
was $717 and $644 at January 29, 2004 and January 30, 2003.

     At January 29, 2004, the accumulated  benefit obligation  exceeded the fair
value of the plans' assets in the Albertsons  Employees  Corporate Pension Plan,
Albertsons  Salaried  Employees  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 unrecognized prior service cost is a component of other comprehensive
income and is reflected in stockholders' equity, net of related tax benefit.


                                     Page 24
<PAGE>

     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 29,       January 30,
                                                                                        2004              2003
        ------------------------------------------------------------------- ----------------- -----------------
        <S>                                                                             <C>               <C>
        Projected benefit obligation:
           Albertsons Employees Corporate Pension Plan                                  $432              $383
           Albertsons Salaried Employees Pension Plan                                    280               253
           Executive Pension Makeup Plan                                                  21                20
        Accumulated benefit obligation:
           Albertsons Employees Corporate Pension Plan                                   429               381
           Albertsons Salaried Employees Pension Plan                                    267               243
           Executive Pension Makeup Plan                                                  21                20
        Plan assets (fair market value):
           Albertsons Employees Corporate Pension Plan                                   279               216
           Albertsons Salaried Employees Pension Plan                                    226               181
</TABLE>

    Net periodic benefit expense (income) for Company-sponsored defined benefit
pension plans was as follows:
<TABLE>
<CAPTION>
                                                                            2003            2002          2001
        -------------------------------------------------------- ----------------- ---------------- -------------
        <S>                                                                  <C>             <C>           <C>
        Service cost - benefits earned during the period                     $13             $12           $11
        Interest cost on projected benefit obligations                        40              37            35
        Expected return on assets                                            (32)            (39)          (48)
        Amortization of prior service cost                                    (6)             (7)           (7)
        Recognized net actuarial loss                                         22               9             -
        Curtailment gain                                                      (7)              -             -
        -------------------------------------------------------- ----------------- ---------------- -------------
        Net periodic benefit expense (income)                                $30             $12           $(9)
        ======================================================== ================= ================ =============
</TABLE>

    The net periodic postretirement benefit cost was as follows:
<TABLE>
<CAPTION>

                                                                            2003            2002          2001
        ---------------------------------------------------------- -------------- ----------------- -----------
        <S>                                                                   <C>             <C>           <C>
        Service cost                                                          $2              $3            $3
        Interest cost                                                          4               4             4
        Amortization of unrecognized gain                                     (1)             (1)           (1)
        ---------------------------------------------------------- -------------- ----------------- -----------
        Net periodic postretirement benefit cost                              $5              $6            $6
        ========================================================== ============== ================= ===========
</TABLE>

     Net  periodic  benefit  expense  (income)  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.   Weighted-average   assumptions   used  for  the
Company-sponsored defined benefit pension plans were as follows:
<TABLE>
<CAPTION>
                                                            2003             2002              2001
        ------------------------------------------ -------------- -- ------------- -- --------------
         <S>                                           <C>              <C>               <C>
         Weighted-average assumptions used to
         determine benefit obligations:
           Discount rate                                    5.80%            6.15%             6.75%
           Rate of compensation increase               3.45-4.50%       3.40-4.50%        3.70-4.50%

        Weighted-average assumptions used to
        determine net periodic benefit cost:
           Discount rate                                    6.15%            6.75%             7.15%
           Rate of compensation increase               3.45-4.50%       3.40-4.50%        3.70-4.50%
           Expected long-term return on plan                8.00%            8.50%             9.50%
           assets
</TABLE>

     The discount  rate used to determine the  Company-sponsored  postretirement
health and life insurance  benefits  plans was 3.55%,  6.10% and 6.75% as of the
end of 2003, 2002 and 2001,  respectively.  As a result of a plan curtailment in
fiscal year 2003,  there are no expected  employer paid benefit payments for any
employees who retire after June 1, 2004. Therefore, the duration of the expected
employer  paid benefit  payments was  reduced.  Discount  rates are based on the
expected timing and amounts of the expected employer paid benefits.

                                     Page 25
<PAGE>

     Expected long-term return on plan assets is estimated by asset class and is
generally based on historical  returns,  volatilities  and risk premiums.  Based
upon the plan's asset  allocation,  composite  return  percentiles are developed
upon which the plan's expected long-term return is based.

     The expected  employer benefit payments for certain pre-1991  retirees were
measured  using an annual medical trend in the  age-specific  per capita cost of
covered health care benefits of 6% for years 2002 and later.  Medical trend does
not affect the expected employer benefit payments for other retirees.

     With the exception of the plans covering ASC  grandfathered  retirees,  all
postretirement plans are contributory, with participants' contributions adjusted
periodically.  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.

     Since the subsidy  levels for the  Albertsons  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.

     Assets of the two funded Company defined benefit pension plans are invested
in directed trusts. Assets in the directed trusts are invested as follows:
<TABLE>
<CAPTION>
                                                                 January 29, 2004      January 30,
                                                                                              2003
        -------------------------------------------------------- ----------------- ----------------
        <S>                                                                  <C>               <C>
        Company  common  stock ($0 and $39 at January  29, 2004                0%              10%
        and January 30, 2003)
        Domestic equity                                                       53%              39%
        International equity                                                  18%              15%
        Fixed income                                                          27%              34%
        Cash equivalents                                                       2%               2%
        -------------------------------------------------------- ----------------- ----------------
                                                                             100%             100%
        ======================================================== ================= ================
</TABLE>


     Investments in the pension trust are overseen by the Investment  Management
Subcommittee  which is made up of officers  of the Company and outside  experts.

     The overall investment  strategy and policy has been developed based on the
need to satisfy the long-term  liabilities of the Company's  pension plans. Risk
management  is  accomplished  through   diversification  across  asset  classes,
multiple  investment manager portfolios and both general and  portfolio-specific
investment guidelines.  The asset allocation guidelines are as follows:

<TABLE>
<CAPTION>
                           Minimum Exposure          Target           Maximum Exposure
                           ----------------          ------           ----------------
    <S>                              <C>               <C>                    <C>
    Domestic Equities
         Large                       40%               50%                    60%
         Small                        5                10                     15
    Non-U.S. Equities                10                15                     20
    Fixed Income                     20                25                     30
</TABLE>


     Managers  are  expected to generate a total  return  consistent  with their
philosophy offer protection in down markets and outperform both their respective
peer  group  medians  and an  appropriate  benchmark,  net of  expenses,  over a
three-to-five year period.

     The investment guidelines contain the following:
          -Categorical  restrictions such as no commodities, no short sales, and
           no margin purchases;
          -Portfolio  restrictions  that  address  such things as proxy  voting,
           brokerage arrangements  and restrictions on  the purchase  of Company
           Securities;
          -Asset class  restrictions that address such things as single security
           or sector concentration,  capitalization  limits and minimum  quality
           standards; and
          -A provision for specific  exemptions from  the above guidelines upon
           approval by the Investment Management Subcommittee.

     Futures and  options  must be used for  hedging  purposes  only and not for
speculative purposes. Long futures positions may be used in place of cash market
securities  (e.g.,  treasury futures  purchased in place of buying long treasury
bonds).

                                     Page 26
<PAGE>
     The Company  expects to contribute  $65 to its pension  plans in 2004.  The
following   benefit  payments,   which  reflect  expected  future  service,   as
appropriate,  are expected to be paid by the Company's  defined  benefit pension
plans:
<TABLE>
<CAPTION>
                                                                 Pension Benefits
        -------------------------------------------------------- -----------------
        <S>                                                                  <C>
        2004                                                                  $19
        2005                                                                   22
        2006                                                                   24
        2007                                                                   27
        2008                                                                   30
        Years 2009-2013                                                       208
</TABLE>
     The Company also sponsors the  Albertsons  Savings and  Retirement  Estates
("ASRE") Plan (formerly the American Stores Retirement  Estates Plan) which is a
defined  contribution  retirement  Plan.  ASRE is a profit  sharing  plan with a
salary deferral feature pursuant to Section 401(k) of the Internal Revenue Code.
Most participants in ASRE are eligible to receive a profit sharing  contribution
(Company contribution based on employee compensation).  In addition, the Company
provides a matching  contribution  based on the amount of eligible  compensation
contributed by the associate. ASRE was originally authorized by the ASC Board of
Directors for the purpose of providing  retirement benefits for employees of ASC
and its subsidiaries.

     In addition to ASRE, the Company sponsors a tax-deferred savings plan  that
is also a salary  deferral  plan  pursuant  to  Section  401(k) of the  Internal
Revenue Code.  The plan covers  employees  represented by a labor union who meet
age  and  service  eligibility  requirements  and  whose  collective  bargaining
agreement provides for participation.

     All Company  contributions  to ASRE 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   contributes  to  various  plans  under  industry  wide
collective bargaining  agreements,  primarily for defined benefit pension plans.
Total  contributions  to these plans were $92 for 2003, $80 for 2002 and $49 for
2001.  The  Company  also  contributes  to various  plans  under  industry  wide
collective  bargaining agreements which provide for health care benefits to both
active employees and retirees.  Total contributions to these plans were $416 for
2003, $408 for 2002 and $371 for 2001.

    Retirement plans expense (income) was as follows:
<TABLE>
<CAPTION>
                                                                        2003          2002         2001
   ------------------------------------------------------------- ------------ ------------- ------------
   <S>                                                                 <C>           <C>          <C>
   Defined benefit pension plans                                       $  30         $  12        $ ( 9)
   ASRE defined contribution plan                                        143           153          150
   Multi-employer plans                                                   92            80           49
   ------------------------------------------------------------- ------------ ------------- ------------
                                                                       $ 265         $ 245        $ 190
   ============================================================= ============ ============= ============
</TABLE>
     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.

     Following  is a  summary  of the  obligation  for  postemployment  benefits
included in the Company's Consolidated Balance Sheets:
<TABLE>
<CAPTION>
                                                                              January 29,       January 30,
                                                                                     2004              2003
   -------------------------------------------------------------------- ------------------ -----------------
   <S>                                                                              <C>               <C>
   Included with salaries and related liabilities                                   $  37             $  25
   Included with other long-term liabilities                                           63                67
   -------------------------------------------------------------------- ------------------ -----------------
                                                                                    $ 100             $  92
   ==================================================================== ================== =================
</TABLE>
                                     Page 27
<PAGE>
     On  December  8,  2003 the  Medicare  Prescription  Drug,  Improvement  and
Modernization  Act of 2003 (the "Act") was signed into law. The Act introduces a
prescription  drug benefit under Medicare Part D as well as a federal subsidy to
sponsors of retiree health benefit plans that provide a benefit that is at least
actuarially  equivalent  to  Medicare  Part D. In  accordance  with  FASB  Staff
Position No. FAS 106-1,  "Accounting and Disclosure  Requirements Related to the
Medicare  Prescription  Drug,  Improvement and  Modernization  Act of 2003", the
Company  has  deferred   recognition   of  any  effects  the  Act  may  have  on
Company-sponsored  postemployment  benefit plans and has not yet  determined the
impact,  if  any,  on  the  Company.  Specific  authoritative  guidance  on  the
accounting for the federal subsidy is pending and that guidance, when issued,
could result in a retroactive change in previously reported information.

     Collective  Bargaining  Agreements:  As of January  29,  2004,  the Company
employed  approximately  212,000 people,  which included  approximately  198,000
regular workers and 14,000  replacement  workers in stores directly  impacted by
the now resolved labor dispute in southern  California.  As of January 29, 2004,
approximately  58%  of  the  Company's  employees  were  covered  by  collective
bargaining agreements, primarily with the United Food and Commercial Workers and
International Brotherhood of Teamsters.  Labor agreements covering approximately
45,000 associates expire during 2004.

18.  Employment Contracts and Change in Control Agreements
     The Company  has  entered  into a ten-year  employment  agreement  with its
Chairman of the Board,  Chief Executive Officer and President,  which provides a
minimum base salary,  signing bonus,  annual bonus  payments,  stock options and
deferrable  stock awards as well as other  benefits (the "CEO  Agreement").  The
Company has also  entered  into  agreements  with certain  other  officers  (the
"Officers  Agreements").  These agreements include specified amounts for signing
bonus, base salary, annual bonus payments, stock option awards and deferrable or
deferred stock unit awards.  In the event of  termination of employment  without
cause  within  the first  two or three  years of  service  for  purposes  of the
Officers  Agreements  and  during  the  ten-year  term for  purposes  of the CEO
Agreement,  the executive would be entitled to certain  guaranteed  payments and
the vesting of stock awards.

     The Company has entered  into  change-in-control  ("CIC")  agreements  with
certain  executives to provide them with stated  severance  compensation  should
their   employment  with  the  Company  be  terminated   under  certain  defined
circumstances prior to or following a CIC. The CIC agreements have varying terms
and provisions  depending upon the executive's level within the organization and
other  considerations,  including  up to three  times  current  base  salary and
current target bonus,  payable in lump sum for the most senior  executives  and,
for these executives, a tax gross-up payment to make the executive whole for any
excise taxes incurred due to Section 280G of the Internal Revenue Code.

     The CIC  agreements  have a term of  approximately  three  years  and three
months, with each agreement expiring on December 31, 2005. However, beginning on
January 1, 2004 and each January 1st thereafter,  the term of the agreement will
automatically  be  extended  for an  additional  year  unless the Company or the
executive  gives notice by September 30 of the  preceding  year that it does not
wish to extend the agreement.  In the event that a CIC occurs during the term of
the agreement, the agreement provides for a two-year protection period (referred
to as the severance  period)  during which the executive will receive the stated
benefits upon an involuntary  termination  (other than for cause) or resignation
for Good Reason as defined in the agreements.

     The agreements are considered to be "double trigger"  arrangements  wherein
the payment of severance  compensation  is predicated upon the occurrence of two
triggering events: (1) the occurrence of a CIC as defined in the agreements; and
(2) the involuntary  termination of the executive  (other than for cause) or the
executive's  termination  of  employment  with the  Company  for Good  Reason as
defined in the agreements.

     In consideration for the severance  protection afforded by such agreements,
the senior executives have agreed to non-compete  provisions for the term of the
agreements  and for one year  following the date of  termination  and all of the
executives   covered  by  the  CIC  program   described  above  have  agreed  to
non-solicitation  provisions  for the  term of the  agreements  and for one year
following the date of termination.

19.  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.

                                     Page 28
<PAGE>
     Following is a summary of the Company's assets under capitalized leases; $2
of real estate and  equipment is included in assets held for sale at January 29,
2004 and January 30, 2003:
<TABLE>
<CAPTION>
                                                                        January 29,        January 30,
                                                                               2004               2003
   -------------------------------------------------------------- ------------------ -------------------
   <S>                                                                        <C>                <C>
   Real estate and equipment                                                  $ 420              $ 355
   Accumulated amortization                                                    (110)               (98)
   -------------------------------------------------------------- ------------------ -------------------
                                                                              $ 310              $ 257
   ============================================================== ================== ===================
</TABLE>
     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 29, 2004, are as follows:
<TABLE>
<CAPTION>
                                                              Operating                           Capital
                                                                 Leases       Subleases            Leases
   --------------------------------------------------- ----------------- --------------- ----------------
   <S>                                                          <C>            <C>                 <C>
   2004                                                         $   349        $    (41)           $   53
   2005                                                             326             (41)               49
   2006                                                             302             (38)               47
   2007                                                             280             (35)               47
   2008                                                             251             (22)               46
   Thereafter                                                     2,257             (49)              623
   --------------------------------------------------- ----------------- --------------- ----------------
   Total minimum obligations (receivables)                      $ 3,765        $   (226)              865
   =================================================== ================= ===============
   Interest                                                                                          (499)
   --------------------------------------------------- ----------------- --------------- -----------------
   Present value of net minimum obligations                                                           366
   Current portion                                                                                    (14)
   --------------------------------------------------- ----------------- --------------- -----------------
   Long-term obligations at January 29, 2004                                                       $  352
   =================================================== ================= =============== =================
</TABLE>
    Rent expense under operating leases was as follows:
<TABLE>
<CAPTION>
                                                                     2003              2002           2001
   ---------------------------------------------------- ------------------ ------------------ --------------
   <S>                                                              <C>               <C>            <C>
   Minimum rent                                                     $ 396             $ 389          $ 375
   Contingent rent                                                     18                26             28
   ---------------------------------------------------- ------------------ ------------------ --------------
                                                                      414               415            403
   Sublease rent                                                      (94)              (92)           (94)
   ---------------------------------------------------- ------------------ ------------------ --------------
                                                                    $ 320             $ 323          $ 309
   ==================================================== ================== ================== ==============
</TABLE>
20.  Related Party Transactions
     In 2003, the Company leased one store and two office locations ($1 of rent,
common  area  maintenance  fees  and  taxes  paid)  from an  entity  that  has a
relationship  with a member of the  Board of  Directors.  In 2001 and 2002,  the
Company  leased  nine  stores  and two office  locations  and paid  common  area
maintenance  fees  for  eight  other  stores  ($3 and $3 of  rent,  common  area
maintenance fees and taxes paid during 2002 and 2001,  respectively) purchased a
piece of land ($2 during 2001) and obtained consulting services  (insignificant)
from entities that have or, at the time had, a relationship with certain members
of the Board of Directors.

21.  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  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 bank line borrowings) were as follows:
<TABLE>
<CAPTION>
                                                                         January 29,        January 30,
                                                                                2004               2003
    ---------------------------------------------------------------- ---------------- ------------------
    <S>                                                                      <C>                <C>
    Fair value                                                               $ 5,491            $ 5,675
    Carrying amount                                                            4,958              5,055
</TABLE>
                                     Page 29
<PAGE>

22.  Legal Proceedings
     The Company is subject to various lawsuits,  claims and other legal matters
that arise in the ordinary course of conducting business.

     In March 2000 a class action complaint was filed against Albertsons 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  (Gardner,  et al. v.
Albertson's,  Inc.,  et al.) by  bonus-eligible  managers  seeking  recovery  of
additional  bonus  compensation  based  upon  plaintiffs'  allegation  that  the
calculation  of profits on which their  bonuses were based  improperly  included
expenses for workers' compensation costs, cash shortages, premises liability and
"shrink"  losses in  violation  of  California  law.  In October  2001 the court
granted summary  judgment  against Sav-on Drug Stores,  finding one of its bonus
plans unlawful under plaintiffs' liability theory. In August 2001 a class action
complaint with very similar claims, also involving  bonus-eligible managers, was
filed  against  Albertsons  as well as Lucky  Stores,  Inc. and American  Stores
Company, wholly-owned subsidiaries of the Company, in the Superior Court for the
County of Los Angeles,  California  (Petersen,  et al. v. Lucky Stores, Inc., et
al.). In June 2002 the cases were consolidated and in August 2002 a class action
with respect to the  consolidated  case was certified by the court. The Court of
Appeal of the State of California  Second Appellate  District decision in Ralphs
Grocery Co. vs. Superior Court, 112 Cal. App. 4th 1090 (2003) addressed  certain
of the issues advanced by the plaintiffs in this lawsuit.  On February 18, 2004,
the California  Supreme Court  declined to review this decision.  Certain of the
issues were decided by the appellate court  favorably to the Company's  position
and  certain  were  decided  adverse to the  Company's  position.  There  remain
numerous issues to be resolved by the trial court.  The Company  believes it has
strong  defenses on these  issues and the Company is  vigorously  advancing  its
position.  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 that the ultimate resolution of this action will have
a material  adverse  effect on the  Company's  financial  condition,  results of
operations or cash flows.

     In April 2000 a class action complaint was filed against Albertsons 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  (Gardner,  et al. v.
American  Stores  Company,  et al.) by assistant  managers  seeking  recovery of
overtime  pay based  upon  plaintiffs'  allegation  that  they  were  improperly
classified  as exempt  under  California  law.  In May 2001 a class  action with
respect to Sav-on Drug Stores  assistant  managers was certified by the court. A
case with very  similar  claims,  involving  the Sav-on  Drug  Stores  assistant
managers  and  operating  managers,  was also  filed in April 2000  against  the
Company's  subsidiary  Sav-on Drug Stores,  Inc. in the  Superior  Court for the
County of Los Angeles, California (Rocher, Dahlin, et al. v. Sav-on Drug Stores,
Inc.)  and was also  certified  as a class  action.  In April  2002 the Court of
Appeal of the State of California Second Appellate  District reversed the Rocher
class certification,  leaving only two plaintiffs.  The California Supreme Court
has accepted plaintiffs' request for review of this class  decertification.  The
Gardner case is on hold  pending the review of the Rocher class  decertification
issue by the California  Supreme Court.  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 that
the ultimate resolution of these lawsuits will have a material adverse effect on
the Company's financial condition, results of operations or cash flows.

     In September 2000, an agreement was 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 and 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 met eligibility  criteria have been
allowed  to  present   their   off-the-clock   work   claims  to  a   settlement
administrator. Additionally, current and former grocery managers employed in the
State of California have been allowed to present their exempt status claims to a
settlement  administrator.  The Company  mailed  notices of the  settlement  and
claims  forms  to  approximately   70,500  associates  and  former   associates.
Approximately 6,000 claim forms were returned, of which approximately 5,000 were
deemed by the settlement  administrator  to be incapable of valuation,  presumed
untimely,  or both.  The  claims  administrator  was  able to  assign a value to
approximately  1,000  claims,  which  amount  to a total of  approximately  $14,
although the value of many of those claims is still  subject to challenge by the
Company.  A second claim  process was ordered by the court,  but the parties are
still waiting for final  instructions  from the Court.  The Company is presently
unable to determine the number of individuals  who may  ultimately  submit valid
claims or the amounts that it may  ultimately be required to pay with respect to
such claims. Based on the information presently available to it, management does
not expect  that the  satisfaction  of valid  claims  submitted  pursuant to the
settlement  will  have a  material  adverse  effect on the  Company's  financial
condition, results of operations or cash flows.

                                     Page 30
<PAGE>

     On November 20, 2003,  three consumers filed an action in California  state
court (Kerner, et al. v. Albertsons,  Inc.; Ralphs Grocery Company;  and Safeway
Inc.,  dba  Vons,  a Safeway  Company,  Los  Angeles  Superior  Court,  Case No.
BC306456),  claiming that certain  provisions  of the Labor  Dispute  Agreements
violate California's  Cartwright Act and the Unfair Competition Law. The lawsuit
seeks unspecified  monetary damages and injunctive  relief. On February 2, 2004,
the Attorney  General for the State of California filed an action in Los Angeles
federal court (California,  ex rel Lockyer v. Safeway,  Inc. dba Vons, a Safeway
Company;  Albertsons,  Inc. and Ralphs Grocery Company, a division of The Kroger
Co.,  United States  District  Court Central  District of  California,  Case No.
CV04-0687)  claiming that certain  provisions  of the Labor  Dispute  Agreements
violate  section  1 of the  Sherman  Act.  The  lawsuit  seeks  declarative  and
injunctive  relief.  The Company  filed its answer on  February  24,  2004.  The
Company has strong defenses  against these lawsuits and is vigorously  defending
them.  Although  these  lawsuits  are subject to  uncertainties  inherent in the
litigation process, based on the information presently available to the Company,
management  does not expect that the ultimate  resolution  of these actions will
have a material adverse effect on the Company's financial condition,  results of
operations or cash flows.

     The Company is also involved in routine legal proceedings incidental to its
operations.  Management  does not expect that the ultimate  resolution  of these
legal proceedings will have a material adverse effect on the Company's financial
condition, results of operations or cash flows.

     The statements above reflect management's current expectations based on the
information presently available to the Company. However, predicting the outcomes
of claims and  litigation  and  estimating  related costs and exposures  involve
substantial  uncertainties that could cause actual outcomes, costs and exposures
to vary materially from current expectations. In addition, the Company regularly
monitors its exposure to the loss  contingencies  associated  with these matters
and may from time to time change its  predictions  with  respect to outcomes and
its estimates with respect to related costs and  exposures.  It is possible that
material differences in actual outcomes, costs and exposures relative to current
predictions and estimates, or material changes in such predictions or estimates,
could have a  material  adverse  effect on the  Company's  financial  condition,
results of operations or cash flows.

23.  Commercial Commitments and Guarantees
Commercial Commitments
     The  Company  had  outstanding  Letters of Credit of $103 as of January 29,
2004, all of which were issued under separate agreements with multiple financial
institutions.  These  agreements  are not associated  with the Company's  credit
facilities.  Of the $103  outstanding  at year end, $83 were standby  letters of
credit covering primarily workers' compensation or performance obligations.  The
remaining  $20 were  commercial  letters  of  credit  supporting  the  Company's
merchandise  import  program.  The  Company  paid  issuance  fees  that  varied,
depending  on type,  up to 0.90% of the  outstanding  balance  of the  letter of
credit.

Guarantees
     The Company provides guarantees,  indemnifications and assurances to others
in the ordinary course of its business. The Company has evaluated its agreements
that contain  guarantees  and  indemnification  clauses in  accordance  with the
guidance of FASB Interpretation No. 45,  "Guarantor's  Accounting and Disclosure
Requirements for Guarantees,  Including  Indirect  Guarantees of Indebtedness of
Others".

     The Company is contingently  liable for certain  operating leases that were
assigned  to third  parties  in  connection  with  various  store  closures  and
dispositions.  If any of  these  third  parties  were to fail to  perform  their
obligations  under the lease,  the Company  could be  responsible  for the lease
obligations.  In 2003,  the Company  was  notified  that  certain of these third
parties have become insolvent and are seeking bankruptcy protection.  At January
29, 2004,  approximately  26 store leases for which the Company is  contingently
liable were subject to the  bankruptcy  proceedings of such third parties and 22
of such had been rejected by the applicable  third party.  The Company  recorded
pre-tax  charges of $20 in 2003,  which  represents the remaining  minimum lease
payments  and other  payment  obligations  under the 22  rejected  leases,  less
estimated sublease income and discounted at the Company's  credit-adjusted  risk
free interest rate. As of January 29, 2004, the Company had remaining guarantees
on approximately  192 stores with leases extending  through 2026.  Assuming that
each respective purchaser became insolvent,  an event the Company believes to be
remote  because  of  the  wide  dispersion  among  third  parties  and  remedies
available, the minimum future undiscounted payments,  exclusive of any potential
sublease income, are $273.

     In  connection  with the merger  between the Company  and  American  Stores
Company,  the Company was made party to and  guaranteed a $200  American  Stores
Company  bank term note due July  2004;  this  obligation  is  reflected  in the
Company's  Consolidated  Balance  Sheet as of January  29,  2004 and January 30,
2003.

                                     Page 31
<PAGE>

     The Company enters into a wide range of indemnification arrangements in the
ordinary  course  of  business.   These  include  tort   indemnifications,   tax
indemnifications,  indemnifications  against  third party claims  arising out of
arrangements to provide  services to Albertsons and  indemnifications  in merger
and acquisition  agreements.  It is difficult to quantify the maximum  potential
liability under these indemnifications;  however at January 29, 2004 the Company
was not aware of any material liabilities arising from these indemnifications.

24.  Computation of Earnings Per Share
<TABLE>
<CAPTION>

                                                        2003                      2002                      2001
---------------------------------------------- ----------------------    -----------------------    ----------------------

                                                  Diluted     Basic         Diluted      Basic         Diluted     Basic
                                               ------------ ---------    ----------- -----------    ----------- ----------
<S>                                                 <C>       <C>            <C>         <C>            <C>        <C>
Earnings (loss) from:
    Continuing operations                           $ 556     $ 556          $ 865       $ 865          $ 496      $ 496
    Discontinued operations                             -         -           (286)       (286)             5          5
    Cumulative effect of change in
    accounting principle                                -         -            (94)        (94)             -          -
                                                    ------    ------        -------      ------         ------     ------
        Net earnings                                $ 556     $ 556          $ 485       $ 485          $ 501      $ 501
                                                    ======    ======         ======      ======         ======     ======

Weighted average common shares outstanding            368       368            397         397            406        406
                                                              ======                     ======                    ======
Potential common share equivalents                      -                        2                          2
                                                    ------                   ------                     ------
Weighted average shares outstanding                   368                      399                        408
                                                    ======                   ======                     ======

Earnings (loss) per common share and common
 share equivalents:
    Continuing operations                           $1.51     $1.51          $2.17       $2.18          $1.22      $1.22
    Discontinued operations                             -         -          (0.72)      (0.72)          0.01       0.01
    Cumulative effect of change in
     accounting principle                               -         -          (0.23)      (0.24)             -          -
                                                   -------   ------         -------     -------        -------    -------
        Net earnings                                $1.51     $1.51          $1.22       $1.22          $1.23      $1.23
                                                   =======   =======        =======     =======        =======    =======

Calculation of potential common share equivalents:
   Options to purchase potential common
    shares                                             11                       10                         17
   Potential common shares assumed purchased
    with potential proceeds                           (11)                      (8)                       (15)
                                                   -------                    ------                   -------
   Potential common share equivalents                   -                        2                          2
                                                   =======                    ======                   =======

Calculation of potential common shares
 assumed purchased with potential
 proceeds:
   Potential proceeds from exercise of
    options to purchase common shares               $ 221                    $ 227                      $ 455
   Common stock price used under treasury
    stock method                                   $20.33                   $27.77                     $31.12
                                                   =======                  =======                    ======
   Potential common shares assumed purchased
    with potential proceeds                            11                        8                         15
                                                   =======                  =======                    =======
</TABLE>

     Outstanding  options excluded in 2003, 2002 and 2001 (option price exceeded
the average  market  price during the period)  amounted to 29.4 million  shares,
20.2 million shares and 9.4 million shares, respectively.

25.  Subsequent Events
Southern California Labor Dispute Settlement
     The southern  California Labor Dispute continued through the first month of
fiscal  year  2004.  The Labor  Dispute  ended  with the  ratification  of a new
collective bargaining agreement on February 28, 2004. Under the terms of the new
collective  bargaining  agreement,   the  Company  agreed  to  fund  a  one-time
contribution to the union health and welfare fund of  approximately  $36 as well
as to make strike  ratification  bonus  payments  of  approximately  $10.  These
amounts will be charged to earnings in the first quarter of fiscal year 2004.

                                     Page 32
<PAGE>

Acquisition of Shaw's
     On March 25, 2004, the Company entered into a stock purchase agreement with
J Sainsbury  plc and  JS USA  Holdings  Inc.  to acquire all of the  outstanding
capital  stock of the  entities  which  conduct J  Sainsbury  plc's U.S.  retail
grocery  store  business  for  approximately  $2,100  in  cash,  as  well as the
assumption of approximately $368 in capital leases. The Company intends to use a
combination of  cash-on-hand  and  commercial  paper to finance a portion of the
purchase price of the  acquisition.  The commercial paper the Company intends to
issue will be backed by the Company's  existing credit  facilities  and/or a new
senior  revolving  bridge facility.  The Company is also  contemplating  various
financing alternatives, including the issuance of debt and/or equity, to finance
a portion of the purchase price and/or to repay some of the commercial paper.

     The operations to be acquired  consists of approximately 200 grocery stores
in the New England area operated under the banners Shaw's and Star Markets.  The
operations to be acquired  ("Shaw's") had sales of approximately  $4,600 for the
fiscal year ended February 28, 2004 and approximately $4,400 for the fiscal year
ended March 1, 2003.

     The  acquisition  is  expected  to  close  in the  second  quarter  of 2004
following the  satisfaction or waiver of certain closing  conditions,  including
the  expiration  or  termination  of the  applicable  waiting  period  under the
Hart-Scott-Rodino  Act and Shaw's fiscal year ended  February 28, 2004 financial
statement audit reflecting a specified  minimum EBITDA.  Because of the goodwill
that is expected to be  generated  as a result of the  acquisition,  the Company
will  have to  obtain  prospective  waivers  from the  lenders  under two of the
Company's  existing credit  facilities in order to remain in compliance with the
consolidated  tangible  net worth  covenant  contained in these  agreements.  No
amounts were outstanding under these facilities as of January 29, 2004.

26.  Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>

(Dollars in millions, except per share data -
Unaudited)                                             First      Second       Third       Fourth        Year
--------------------------------------------------- ---------- ----------- ----------- ------------ -----------
<S>                                                  <C>         <C>         <C>          <C>        <C>
2003
Sales                                                $ 8,937     $ 9,053     $ 8,796      $ 8,650    $ 35,436
Gross profit                                           2,545       2,655       2,526        2,404      10,130
Operating profit                                         381         369         255          313       1,318
Net earnings                                             172         162          92          130         556
Earnings per share:
   Basic                                                0.47        0.44        0.25         0.35        1.51
   Diluted                                              0.47        0.44        0.25         0.35        1.51
--------------------------------------------------- ---------- ----------- ----------- ------------ -----------
2002
Sales                                                $ 8,921     $ 8,941     $ 8,657      $ 9,107    $ 35,626
Gross profit                                           2,623       2,631       2,529        2,595      10,378
Operating profit                                         487         520         385          425       1,817
(Loss) earnings from discontinued operations            (303)         14          (2)           5        (286)
(Loss) earnings before cumulative effect of
   accounting change                                     (71)        257         188          205         579
Cumulative effect of accounting change                   (94)          -           -            -         (94)
Net (loss) earnings                                     (165)        257         188          205         485
 (Loss) earnings per share:
   Basic                                               (0.41)       0.63        0.47         0.54        1.22
   Diluted                                             (0.40)       0.63        0.47         0.54        1.22
--------------------------------------------------- ---------- ----------- ----------- ------------ -----------
</TABLE>





                                     Page 33
<PAGE>


                                   Signatures

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                   ALBERTSON'S, INC.


                                   By:   \S\ Felicia D. Thornton
                                   ---------------------------------------------
                                         Felicia D. Thornton
                                         (Executive Vice President
                                          and Chief Financial Officer)




Date:  April 1, 2004











                                     Page 34
<PAGE>


                                Index to Exhibits
                   Filed with Amendment No. 1 to Annual Report
                             on Form 10-K/A for the
                           Year Ended January 29, 2004

Number              Description

23   Independent Auditors' Consent - Deloitte & Touche LLP

31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the
     Sarbanes-Oxley Act of 2002.

31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the
     Sarbanes-Oxley Act of 2002.