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

                                    FORM 10-K
                         -------------------------------

              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:   NONE

     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.


                                       1
<PAGE>



                                ALBERTSON'S, INC.
                                    FORM 10-K
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
Item                                                                                                    Page

                                     PART I
---------- ------------------------------------------------------------------------------------- ----------------
<S>        <C>                                                                                          <C>

           Cautionary Statement                                                                         3

 1.        Business                                                                                     3

 2.        Properties                                                                                   7

 3.        Legal Proceedings                                                                            9

 3A.       Executive Officers of the Registrant                                                        11

 4.        Submission of Matters to a Vote of Security Holders                                         12

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


                                     PART II
---------- ------------------------------------------------------------------------------------- ----------------
 5.        Market for Registrant's Common Equity, Related Stockholder Matters and Issuer               13
           Purchases of Equity Securities

 6.        Selected Financial Data                                                                     14

 7.        Management's Discussion and Analysis of Financial Condition and Results of                  15
           Operations

 7A.       Quantitative and Qualitative Disclosures About Market Risk                                  29

 8.        Financial Statements and Supplementary Data                                                 30

 9.        Change In and Disagreements with Accountants on Accounting and
           Financial Disclosure                                                                        60

 9A.       Controls and Procedures                                                                     60

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


                                    PART III
---------- ------------------------------------------------------------------------------------- ----------------
10.        Directors and Executive Officers of the Registrant                                          61

11.        Executive Compensation                                                                      61

12.        Security Ownership of Certain Beneficial Owners and Management and Related                  61
           Stockholder Matters

13.        Certain Relationships and Related Transactions                                              61

14.        Principal Accountant Fees and Services                                                      61


                                     PART IV
---------- ------------------------------------------------------------------------------------- ----------------
15.        Exhibits, Financial Statement Schedules and Reports on Form 8-K                             62

</TABLE>

SIGNATURES


                                       2
<PAGE>


                                     PART I

Cautionary  Statement  for Purposes of "Safe Harbor  Provisions"  of the Private
Securities Litigation Reform Act of 1995
All statements  other than  statements of historical  fact contained in this and
other documents disseminated by the Company,  including statements regarding the
Company's expected financial  performance,  are  forward-looking  information as
defined in the Private  Securities  Litigation  Reform Act of 1995. In reviewing
such information about the future performance of the Company,  it should be kept
in mind that  actual  results  may differ  materially  from those  projected  or
suggested in such forward-looking information since predictions regarding future
results  of  operations   and  other  future  events  are  subject  to  inherent
uncertainties. These statements may relate to, among other things: statements of
expectation  regarding  the  results  of  operations  had the labor  dispute  in
southern California not occurred;  investing to increase sales;  changes in cash
flow;  increases in general  liability costs,  workers'  compensation  costs and
employee  benefit  costs;  attainment of cost  reduction  goals;  impacts of the
southern California labor dispute;  impacts of the completion of the acquisition
of JS USA Holdings Inc.;  achieving  sales increases and increases in comparable
and identical  sales;  opening and  remodeling  stores;  and the Company's  five
strategic  imperatives.  These statements are indicated by words or phrases such
as "expects,"  "plans,"  "believes,"  "estimate,"  and "goal." In reviewing such
information  about the future  performance of the Company,  it should be kept in
mind that actual results may differ materially from those projected or suggested
in such forward-looking information.

Important  assumptions  and other  important  factors  that could  cause  actual
results  to  differ  materially  from  those  set  forth in the  forward-looking
information  include  changes  in  consumer  spending;  actions  taken by new or
existing competitors (including nontraditional competitors),  particularly those
intended  to  improve  their  market  share  (such as  pricing  and  promotional
activities);   labor  negotiations;   adverse  determinations  with  respect  to
litigation or other claims (including  environmental matters);  employee benefit
costs; continued solvency of third parties on leases the Company has guaranteed;
the Company's ability to recruit,  retain and develop  employees;  the Company's
ability to develop  new stores or complete  remodels as rapidly as planned;  the
Company's ability to implement new technology successfully; stability of product
costs;  the Company's  ability to integrate the operations of acquired or merged
companies,  including JS USA Holding Inc.; the Company's  ability to execute its
restructuring  plans;  the  Company's  ability  to  achieve  its five  strategic
imperatives; and other factors affecting the Company's business in or beyond the
Company's control. These other factors include changes in the rate of inflation;
changes in state or federal legislation or regulation; the cost and stability of
energy sources; changes in the general economy; and changes in interest rates.

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


Item 1.  Business.

General
     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.  The  Company's  general  offices  are  located  at 250
Parkcenter  Boulevard,  Boise,  Idaho  83706 and its  telephone  number is (208)
395-6200.  Information  about  the  Company  is  available  on the  internet  at
www.albertsons.com.

     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 retail
stores in 31 states. These retail stores consist of 1,351 combination  food-drug
stores,  707 stand-alone  drugstores and 247 conventional and warehouse  stores.
The  Company  also  operated  228 fuel  centers  near  existing  stores.  Retail
operations  are  supported  by 17  major  Company  distribution  centers.  These
distribution centers provide product exclusively to the Company's retail stores.

     The Company's  operations are within a single operating segment, the retail
sale of food and drug merchandise.  All the Company's  operations are within the
United States.  As of January 29, 2004, the Company's  stores operated under the
banners  Albertsons,  Albertsons  Express,  Albertsons-Osco,  Albertsons-Sav-on,
Jewel,  Jewel-Osco,  Acme,  Sav-on Drugs,  Osco Drug,  Max Foods and Super Saver
Foods.  The  Company  has  invested  in  these  brands,  their  development  and
protection and considers them important assets.

     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. The Company's fiscal year 2004
contains 53 weeks and ends on February 3, 2005.

                                       3
<PAGE>

     The Company continues to be focused on its five strategic  imperatives that
serve as a guide and a filter for the Company's  initiatives and actions.  These
five imperatives are: 1) Aggressive cost and process control, 2) Maximize return
on invested  capital,  3)  Customer-focused  approach to growth, 4) Company-wide
focus on technology and 5) Energized associates. With these imperatives in mind,
the  Company  announced  on July 18,  2001  the  initial  restructuring  plan of
divesting 165 underperforming retail stores and consolidation and elimination of
four division offices.  The Company announced on March 13, 2002 the second phase
of restructuring which included exiting four underperforming  markets:  Memphis,
Tennessee;  Nashville,  Tennessee;  Houston, Texas; and San Antonio, Texas. This
restructuring  phase involved  divesting 95 stores and two distribution  centers
and  included the  reduction  of division  offices from 15 to 11. On January 30,
2004, the Company  announced a new  organizational  structure in its Dallas/Fort
Worth  division  intended  to  eliminate  layers of  management  and  streamline
operations.  On  February  20,  2004,  the  Company  announced  plans to further
consolidate  its 11  divisions  to seven and to create a new eighth  division to
develop new formats, including price impact stores.

     All dollar amounts in this report are in millions, except per share data.

Retail Formats
     As of January 29, 2004, the Company's retail operations were organized into
11 divisions,  based primarily on geographic  boundaries.  The division staff is
responsible   for  day-to-day   operations  and  for  executing   marketing  and
merchandising programs. This structure allows the division level employees,  who
are closest to the  customer,  to implement  strategies  tailored to each of the
neighborhoods  that the Company serves.  In February 2004, the Company announced
its plans to further consolidate its 11 divisions to eight.

     The  Company's  combination  food-drug  stores are super  grocery  and drug
stores under one roof and range in size from 31,000 to 107,000 square feet. Most
of these stores offer  prescription  drugs and an expanded  section of cosmetics
and general  merchandise  in addition to specialty  departments  such as service
seafood and meat, bakery, lobby/video, service delicatessen,  liquor and floral.
Many also offer meal centers, party supply centers, coffee bars, in-store banks,
dry cleaning, photo processing and destination categories for beverages, snacks,
pet care products, paper products and baby care merchandise.  All shopping areas
are served by a common set of checkstands.

     Albertsons  strategic  advantage  in  today's  marketplace  comes  from the
Company's  unique  heritage in two market formats - food stores and  drugstores.
Albertsons  has  decades of  experience  in  serving  customers  in both  market
formats.  This  unique  position in the  marketplace  has enabled the Company to
bring  together  separate  retail  brands,  creating the dual brand  combination
stores that leverage the Company's  separate food and drug  experience and brand
equity. The Company began expanding the dual brand combo concept in 2001 and has
continued to roll-out the dual brand concept  through  2003.

     The  Company's   stand-alone   drugstores  offer  convenient  shopping  and
prescription pickup as well as a wide assortment of general merchandise,  health
and beauty care products,  over-the-counter medication, greeting cards and photo
processing.  The Company's  drugstores are typically located on corners and many
offer a drive-thru pharmacy. The Company's stand-alone drugstores average 18,500
square feet.

     The Company's other store formats  include  conventional  supermarkets  and
warehouse  stores.  These stores offer a full selection in the basic departments
of grocery, meat, produce, dairy and limited general merchandise. Many locations
have a pharmacy, in-store bakery and service delicatessen.

     As of January 29, 2004, the Company operated 228 fuel centers in 22 states.
Fuel centers are generally  located in the parking lots of the Company's stores.
These centers feature three to six fuel pumps and a small  building,  ranging in
size from a pay-only kiosk to a convenience store.

     In November 1999  Albertsons  introduced its own grocery  delivery Web site
when Albertsons.com entered the Seattle,  Washington market. Since the launch of
Albertsons.com,  the Company has  continued  to  introduce  this service to more
areas. As of January 29, 2004,  Albertsons.com operated in and around San Diego,
Los Angeles, San Francisco, San Jose and Oakland, California;  Boise, Idaho; Las
Vegas,  Nevada;  Portland,  Oregon;  Dallas/Fort  Worth,  Texas; and Seattle and
Vancouver,  Washington.  By using its  brick-and-mortar  stores,  Albertsons has
evolved its online  model to take  advantage  of its retail  grocery  expertise,
brand  recognition  and  existing  infrastructure.  With more than four years of
experience,  Albertsons.com  offers a reliable and proven online grocery service
that delivers products direct from the store to the customers' location.

                                       4
<PAGE>

     Savon.com,  Albertsons  online  drugstore,  serves the Company's  customers
nationwide.  Savon.com  has a  nationwide  online  pharmacy  service that offers
sundry items, new and refill prescriptions and consumer health information.  The
Web site allows customers across the country the freedom to have new or refilled
prescriptions  ready for  pickup at any local  Albertsons  food or drug store or
mailed to their location of preference.


Marketing and Merchandising
     The  Company's  brand  promise is to "Make Life Easier for our  Customers".
This is reinforced to customers through associate  education and print and media
advertising. With this brand promise in mind, the Company strives to merchandise
stores to cater to the neighborhoods  served.  For example,  some stores offer a
variety of products in categories such as Asian, Hispanic and kosher foods.

     The Company supplies its stores with  merchandise  through its distribution
centers and outside suppliers,  or directly from manufacturers,  in an effort to
obtain  merchandise at the lowest possible cost. The Company believes that it is
not dependent on any one supplier and considers its relations with its suppliers
to be satisfactory.

     Management  believes that retail stores  offering a broad array of products
and  time-saving  services  are  perceived by customers as part of a solution to
today's lifestyle demands.  Accordingly,  a principal component of the Company's
merchandising  strategy is to design stores that offer these  solutions.  In the
Company's  prototype stores,  pharmacies,  in-store bakeries and  delicatessens,
prepared foods  sections and gourmet coffee service are available.  These stores
also feature a selection of prepared  foods and many of these stores offer daily
selections of home meal replacement items, such as rotisserie  chicken,  chicken
cordon  blue,  tamales,   meat  loaf  and  other  dinner  entrees,   sandwiches,
pre-packaged  salads and prepared fresh  vegetables.  The bakery in these stores
offers  an  expanded  selection  of baked  goods  and  self-service  selections.
Finally,  the  Company  has  joined  forces  with  other  retailers  (Toys R Us,
Starbucks and Krispy Kreme) to provide a wider selection of quality  merchandise
to its customers.

     All of the  Company's  stores  carry a broad range of  national  brands and
offer private label brand products in many merchandise  categories.  During 2003
the Company  launched  its premium  private  label  brand,  Essensia and through
January  29,  2004  had  introduced  125  Essensia   products   across  numerous
categories.   The  Company's  stores  provide   consumer   information  such  as
nutritional signing in the meat and produce departments,  freshness code dating,
unit pricing, meal ideas and food information pamphlets.

Employees
     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.
Negotiations  with respect to some of these contracts have commenced.  There can
be no assurances that the Company will be able to  successfully  renegotiate its
union contracts without work stoppages or on acceptable terms.

     The  Company   considers  its  present   relations  with  employees  to  be
satisfactory.  The Company  values its  employees  and  believes  that  employee
loyalty and enthusiasm are key elements of its operating performance.

Environmental
     The  Company  has  identified  environmental  contamination  sites  related
primarily to underground  petroleum storage tanks and groundwater  contamination
at various store,  warehouse,  office and manufacturing  facilities  (related to
current  operations as well as previously  disposed of properties).  The Company
conducts an ongoing  program for the  inspection and evaluation of potential new
sites and the  remediation  and  monitoring  of  contamination  at existing  and
previously   owned  sites.   Although  the  ultimate   outcome  and  expense  of
environmental  remediation is uncertain,  the Company believes that the costs of
required  remediation  and continuing  compliance  with  environmental  laws, in
excess of  current  reserves,  will not have a  material  adverse  effect on the
financial  condition,  results  of  operations  or cash  flows  of the  Company.
Environmental remediation costs were not material in 2003, 2002 or 2001.


                                       5
<PAGE>


Government Regulation
     The Company is subject to regulation by a variety of governmental agencies,
including,  but not limited to, the U.S. Food and Drug Administration,  the U.S.
Department of Agriculture,  the Occupational  Health and Safety  Administration,
the Environmental Protection Agency and other federal, state and local agencies.
The Company's stores are also subject to local laws regarding  zoning,  land use
and the sale of alcoholic  beverages.  The Company  believes  that its locations
comply, in material respects, with such laws and regulations.

Competition
     Food, drug and general  merchandise  retailing involves intense competition
with numerous  competitors.  Competition  is based  primarily on price,  product
quality and variety,  service and  location.  The Company  competes by providing
consumers  with what it  believes  to be an  overall  shopping  experience  that
addresses these competitive  factors.  Price based competition has, from time to
time, adversely affected operating margins. The Company faces direct competition
from many local,  regional  and national  supermarket  chains,  independent  and
specialty grocers,  supercenters,  club stores, specialty retailers (such as pet
centers and toy stores) and large-scale drug retailers.  Increasing  competition
also exists from  convenience  stores,  prepared food retailers,  liquor stores,
video stores, film developing outlets and Internet and mail-order retailers.

Seasonality
     The Company is subject to effects of seasonality.  Sales have  historically
been higher in the  Company's  fourth  quarter  than other  quarters  due to the
holiday season and the increase in cold and flu occurrences.

Available Information
     The Company  makes  available  its annual  reports on Form 10-K,  quarterly
reports  on Form  10-Q,  current  reports  on Form 8-K and  amendments  to those
reports filed or furnished  pursuant to Section 13(a) or 15(d) of the Securities
Exchange  Act of  1934  free  of  charge  through  the  Company's  Web  site  at
http://www.albertsons.com  as soon as reasonably  practicable  after the Company
electronically  files such material with, or furnishes it to, the Securities and
Exchange Commission ("SEC").



                                       6
<PAGE>


Item 2.  Properties.

     During the past ten fiscal years,  the Company has built or acquired  1,966
stores. Approximately 89% of the Company's retail square footage has been opened
or remodeled during this period.

     Albertsons  stores are located in 31 states  concentrated in the Northeast,
Western,  Midwest and Southern areas of the United States.  The table below is a
summary of the stores by state and classification as of January 29, 2004:

<TABLE>
<CAPTION>
                          Combination
                            Food-Drug      Stand-Alone           Other                            Fuel
                               Stores       Drugstores          Stores          TOTAL          Centers  (a)
--------------------- ---------------- ---------------- --------------- -------------- ----------------
    <S>                        <C>                 <C>             <C>          <C>                 <C>

    Arizona                        57               79               -             136               16
    Arkansas                        1               -                -               1                -
    California                    313              322             133             768                7
    Colorado                       51                -              11              62               12
    Delaware                       10                -               2              12                1
    Florida                       121                -               -             121               16
    Idaho                          31                -               5              36               16
    Illinois                      167               90              14             271               19
    Indiana                         6               45               -              51                1
    Iowa                            1               14               -              15                -
    Kansas                          -               21               -              21                -
    Louisiana                      31                -               -              31               12
    Maryland                        3                -               5               8                1
    Michigan                        -                1               -               1                -
    Minnesota                       -                1               -               1                -
    Missouri                        -               34               -              34                -
    Montana                        18                8              14              40                5
    Nebraska                       12               13               -              25                3
    Nevada                         48               44               2              94               11
    New Jersey                     35                -              26              61                -
    New Mexico                     22                4               1              27                4
    North Dakota                    2                6               -               8                -
    Oklahoma                       30                -               -              30               14
    Oregon                         45                -               9              54               13
    Pennsylvania                   43                -              12              55                1
    South Dakota                    1                1               -               2                -
    Texas                         158                -               -             158               47
    Utah                           45                -               4              49                9
    Washington                     75                -               9              84               16
    Wisconsin                      15               24               -              39                1
    Wyoming                        10                -               -              10                3
                      ---------------- ---------------- --------------- -------------- ----------------
       Total                    1,351              707             247           2,305              228
                      ================ ================ =============== ============== ================

    Retail Square
    Footage by Store
    Type (000's)               73,663           13,102           7,234         93,999               (a)
                      ================ ================ =============== ============== ================

</TABLE>

     (a)  All fuel centers are located adjacent to retail stores,  therefore the
          Company  does not count fuel  centers as separate  stores.  The square
          footage  of fuel  centers  is  included  with the  square  footage  of
          adjacent stores.

     The Company has  expanded and improved  its  distribution  facilities  when
opportunities  exist to improve  service to the retail  stores and  generate  an
adequate  return on  invested  capital.  During  2003  approximately  78% of the
merchandise  purchased  for resale in Company  retail  stores was received  from
Company distribution centers.


                                       7
<PAGE>


     Albertsons distribution system consists of 17 major distribution facilities
located  strategically  throughout the Company's  operating  markets.  The table
below is a summary of the  Company's  distribution  facilities  and the  product
categories they support, as of January 29, 2004:
<TABLE>
<CAPTION>
                                                                                       High
                                                                                     Volume                          Square
                                             Frozen                Meat &   Health   Health  General                 Footage
  Major Distribution Facilities      Grocery   Food Liquor Produce   Deli & Beauty & Beauty   Merch. Pharmaceuticals (000's)
  -----------------------------      ------- ------ ------ ------- ------ -------- -------- -------- --------------- -------
  <S>                                  <C>     <C>    <C>     <C>     <C>    <C>      <C>      <C>         <C>         <C>

  Melrose Park, Illinois                X      X              X       X                                                1,662
  Lancaster, Pennsylvania               X                     X       X      X                 X                       1,413
  Brea, California                      X      X                      X                                                1,331
  La Habra, California                  X             X                      X                 X            X          1,203
  Fort Worth, Texas                     X      X              X       X                                                1,131
  Plant City, Florida                   X      X      X       X       X               X                                1,011
  Irvine, California                    X                     X                                                        1,009
  Elk Grove, Illinois                   X                                    X                 X            X            933
  Vacaville, California                 X                                                                                854
  Portland, Oregon                      X      X              X       X                                                   834
  Phoenix, Arizona                      X      X      X       X       X                                                  734
  Salt Lake City, Utah                  X      X              X       X                                                  660
  San Leandro, California                      X              X       X                                                  480
  Sacramento, California                X      X      X       X       X                                                  442
  Ponca City, Oklahoma                                                       X                 X            X            420
  Denver, Colorado                      X      X              X       X                                                  388
  Boise, Idaho                                                               X                 X                         302
  Other Distribution Facilities
  -----------------------------
  Las Vegas, Nevada                                   X                                                                   30
  Indianapolis, Indiana                               X                                                                   22

                                                                                                             ---------------
  TOTAL SQUARE FOOTAGE -  All
  Distribution Facilities (000's)                                                                                     14,859
                                                                                                             ===============
</TABLE>


     The  Company  currently  prefers  to  finance  most new  retail  store  and
distribution  facilities  internally,  thus retaining  ownership of its land and
buildings.  The Company's  internal  expansion plans are expected to be financed
primarily from cash provided by operating  activities.  The Company has and will
continue to finance a portion of its new stores through lease  transactions when
it does not have the opportunity to own the property.

                                       8
<PAGE>

     As of  January  29,  2004,  the  Company  held  title  to both the land and
buildings  of 44% of the  Company's  stores and held title to the  buildings  on
leased land of an additional 11% of the Company's stores. The Company also holds
title  to the land  and  buildings  of most of its  administrative  offices  and
distribution facilities.

Item 3. 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 August  2000 a class  action  complaint  was filed  against  Jewel  Food
Stores,  Inc., an indirect wholly owned subsidiary of the Company and Dominick's
Finer Foods,  Inc. in the Circuit Court of Cook County,  Illinois  alleging milk
price fixing  (Maureen  Baker et al. v. Jewel Food Stores,  Inc. and  Dominick's
Finer Foods, Inc., Case No. 00L 009664). In February 2003, the trial court found
in favor of the  defendants and dismissed the case with  prejudice.  Thereafter,
the  plaintiffs  appealed.  Briefs  have now been  filed for the  appeal and the
matter is pending in the  Illinois  Appellate  Court.  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 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

                                       9
<PAGE>

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.

     On November 1, 2001, the  Environmental  Protection Agency ("EPA") notified
Jewel Food Stores, Inc., an indirect wholly-owned  subsidiary of the Company, of
alleged  violations of the Clean Air Act. No notice of violation was issued, but
the Company and the EPA entered into  discussions that are expected to result in
a consent decree establishing technical protocols for the refrigerant management
program;  setting a penalty  of $0.1;  and  requiring  Jewel to  accelerate  the
industry's future obligation to substitute  non-ozone depleting  refrigerant for
existing refrigerant in some of the Jewel stores.

     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  agreements  (the "Labor
Dispute  Agreements")  between the Company, The Kroger Co. and Safeway Inc. (the
"Retailers")  which provided for  "lock-outs" in the event that any Retailer was
struck  at any or all of its  southern  California  facilities  when  the  other
Retailers were not and contained a provision  designed to prevent the union from
placing  disproportionate  pressure on one or more  Retailer by  picketing  such
Retailer(s) but not the other Retailer(s),  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.


                                       10
<PAGE>


Item 3A. Executive Officers of the Registrant.

Executive and Reporting Officers
<TABLE>
<CAPTION>
                                                                                        Date First Appointed
                                  Age as of                                              as an Executive or
           Name                   3/26/04                Position                         Reporting Officer
           ----                   ---------              --------                       --------------------
<S>                                  <C>   <C>                                                 <C>

Lawrence R. Johnston                 55    Chairman of the Board, Chief Executive              04/23/01
                                           Officer and President

Robert C. Butler                     55    Executive Vice President, Food Operations           03/21/00
                                           and President, Intermountain West Division

Romeo R. Cefalo                      54    Executive Vice President, Real Estate,              03/21/00
                                           Construction, Store Development and New
                                           Formats

Robert J. Dunst, Jr.                 43    Executive Vice President and Chief                  11/19/01
                                           Technology Officer

Clarence J. Gabriel                  50    Executive Vice President, Supply Chain              01/13/03

Kathy J. Herbert                     50    Executive Vice President, Human Resources           09/17/01

John R. Sims                         54    Executive Vice President and                        03/25/02
                                           General Counsel

Felicia D. Thornton                  40    Executive Vice President and Chief                  08/22/01
                                           Financial Officer

Kevin H. Tripp                       49    Executive Vice President, Operations and            12/11/00
                                           Pharmacy

Eric J. Cremers                      40    Senior Vice President, Corporate Strategy           07/15/02
                                           and Business Development

James F. Gentile                     52    Senior Vice President, Six Sigma Quality            02/20/04

Susan M. Neumann                     50    Senior Vice President, Education,                   11/20/03
                                           Communications and Public Affairs

Pamela S. Powell                     52    Senior Vice President, Customer Service             02/20/04

Peter F. Collins                     39    Group Vice President and Controller                 01/15/03

</TABLE>

     Lawrence  R.  Johnston  has served as  President  since  July 24,  2003 and
Chairman  of the  Board and  Chief  Executive  Officer  since  April  23,  2001.
Previously he served as President and Chief Executive Officer,  General Electric
Appliances  Division from November 1999;  President and Chief Executive Officer,
General  Electric  Medical  Systems-Europe,  Middle  East and Africa  from 1997;
Chairman of General Electric Company's European Corporate Executive Council from
1998 to 1999  and  Vice  President,  Sales  and  Distribution  of GE  Appliances
Division from 1989 to 1997.

     Robert C. Butler became  Executive  Vice  President,  Food  Operations  and
President,  Intermountain  West  Division on February  20, 2004.  Previously  he
served as Executive Vice President,  Operations from March 21, 2000; Senior Vice
President,  Merchandising  from  June  23,  1999 and  Vice  President,  Southern
California Division from 1996.

     Romeo R. Cefalo became Executive Vice President, Real Estate, Construction,
Store Development and New Formats on February 20, 2004.  Previously he served as
Executive Vice President,  Operations from March 21, 2000;  President,  Southern
California  Region from June 23,  1999;  Executive  Vice  President  and General
Manager of the Lucky South  Division of American  Stores  Company from 1997; and
Senior Vice President and General Manager of the same division from 1995.

                                       11
<PAGE>

     Robert J. Dunst,  Jr. became  Executive Vice President and Chief Technology
Officer  on  November  19,  2001.   Previously  he  served  as  Vice  President,
Applications Development,  Safeway, Inc. (food and drug retailing) and Director,
Systems Architecture and Infrastructure, Safeway, Inc. from 1995.

     Clarence J.  Gabriel  became  Executive  Vice  President,  Supply  Chain on
January 13, 2003. Previously he served as President, Chief Executive Officer and
Chairman of the Board, Newgistics, Inc. (returns management solutions for direct
retailers)  from  June  2000 and  Division  President,  Corporate  Express  from
November 1997.

     Kathy J.  Herbert  became  Executive  Vice  President,  Human  Resources on
September 17, 2001.  Previously she served as Vice President,  Human  Resources,
Jewel-Osco  Division,  American Stores Company and subsequently  Albertsons from
April 1998.

     John R. Sims became  Executive Vice President and General  Counsel on March
25, 2002.  Previously,  he was Vice  President and Deputy  General  Counsel with
Federated Department Stores, Inc. (department store retailing) from 1990.

     Felicia D. Thornton  became  Executive Vice  President and Chief  Financial
Officer on August 22, 2001.  Previously  she was a business  consultant for HASC
(private real estate  holdings)  from January 2001;  Group Vice  President,  The
Kroger  Co.  (food  and  drug  retailing)  from  February  1999 and  Group  Vice
President, Corporate Planning and Accounting, The Kroger Co. from February 1996.

     Kevin H. Tripp became Executive Vice President,  Operations and Pharmacy on
May 19, 2002. Previously he served as Executive Vice President, Drug and General
Merchandise from December 11, 2000;  President,  Drug Region from June 1999; and
Executive Vice President and General Manager, American Drug Stores from November
1997.

     Eric Cremers became Senior Vice President,  Corporate Strategy and Business
Development  on July 15,  2002.  Previously  he  served  as  Managing  Director,
Investment Banking,  U.S. Bancorp Piper Jaffrey  (investment  banking) from 1999
and Vice  President,  Strategy and  Corporate  Development,  Pillsbury Co. (food
manufacturing) from 1996.

     James F.  Gentile  became  Senior  Vice  President,  Six Sigma  Quality  on
February  20,  2004.  Previously  he served as  President,  Northern  California
Division from August 2002;  Senior Vice President,  Marketing - Midwest Division
from February 2001;  Vice President,  Grocery and General  Merchandise - Midwest
Division from July 2001 and Vice President,  Procurement - Midwest Division from
1994.

     Susan  M.  Neumann  was  promoted  to  Senior  Vice  President,  Education,
Communications and Public Affairs on November 20, 2003. Previously she served as
Group Vice  President,  Communications  and Education from January 2002 and Vice
President, Communications from January 1996.

     Pamela S. Powell was promoted to Senior Vice President, Customer Service on
February 20, 2004. Previously she served as Group Vice President, Marketing from
May 2000; Vice  President,  Marketing from June 1999; and Senior Vice President,
Sales & Marketing Support, American Stores Company from May 1998.

     Peter F. Collins was promoted to Group Vice  President  and  Controller  on
January  15,  2003.  Previously  he served as Group  Vice  President,  Corporate
Accounting and Reporting from July 2002;  Partner,  Arthur  Andersen LLP (public
accounting)  from September 1998; and Senior  Manager,  Arthur Andersen LLP from
September 1995.


Item 4. Submission of Matters to a Vote of Security Holders.

     No matters were  submitted  during the fourth  quarter of 2003 to a vote of
security holders through the solicitation of proxies or otherwise.


                                       12
<PAGE>


                                     PART II

Item 5. Market for Registrant's  Common Equity,  Related Stockholder Matters and
Issuer Purchases of Equity Securities.

     The  Company's  common stock is traded on both the New York Stock  Exchange
and the Pacific Stock Exchange under the symbol ABS. As of March 22, 2004, there
were approximately  29,235 holders of record. The following table sets forth the
reported  high and low  stock  prices by  quarter  as  reported  by the NYSE and
dividends declared:
<TABLE>
<CAPTION>
                                           Common Stock Market Price
                                                                                Dividends
     2003                                    High               Low              Declared
     -----------------------                 ----               ---              --------
            <S>                            <C>               <C>                    <C>
            Fourth Quarter                 $24.19            $19.50                 $0.19
            Third Quarter                   23.65             18.40                  0.19
            Second Quarter                  21.91             17.91                  0.19
            First Quarter                   21.71             17.76                  0.19

     2002
     -----------------------

            Fourth Quarter                  24.60             18.85                  0.19
            Third Quarter                   28.66             22.14                  0.19
            Second Quarter                  35.49             26.51                  0.19
            First Quarter                   35.49             26.88                  0.19
</TABLE>

Dividends
     The Company has paid cash  dividends  on its Common  Stock since 1959.  The
Company pays these  dividends at the  discretion of the Board of Directors.  The
continuation  of these  payments,  the amount of such  dividends and the form in
which the dividends are paid (cash or stock) depend upon many factors, including
the results of operations and the financial condition of the Company.



                                       13
<PAGE>


Item 6. Selected Financial Data.

     The  following  data  have been  derived  from the  consolidated  financial
statements  of the  Company  and  should  be  read  in  conjunction  with  those
statements.

<TABLE>
<CAPTION>

                                          52 Weeks       52 Weeks         52 Weeks        52 Weeks         53 Weeks
(Dollars in millions,                  January 29,    January 30,      January 31,     February 1,      February 3,
  except per share data)                      2004           2003             2002            2001             2000
---------------------------------- ---------------- -------------- ---------------- --------------- ---------------
<S>                                       <C>            <C>              <C>             <C>              <C>
Operating Results:
Sales                                     $ 35,436       $ 35,626         $ 36,605        $ 35,501         $ 36,326
Earnings from continuing operations            556            865              496             746              395
Net earnings                                   556            485              501             765              404
Net earnings as a percent to sales            1.57%          1.36%            1.38%           2.15%            1.11%

Common Stock Data:
Earnings per share from continuing
  operations:
  Basic                                   $   1.51       $   2.18         $   1.22        $   1.78         $   0.93
  Diluted                                     1.51           2.17             1.22            1.78             0.92

Net earnings per share:
  Basic                                       1.51           1.22             1.23            1.83             0.96
  Diluted                                     1.51           1.22             1.23            1.83             0.95

Cash dividends per share:
Albertsons                                    0.76           0.76             0.76            0.76             0.72
American Stores Company
  equivalent                                    -              -                -               -              0.14

Financial Position:
Total assets                              $ 15,394       $ 15,211         $ 15,981        $ 16,094         $ 15,719
Long-term debt and capitalized
  lease obligations                          4,804          5,257            5,336           5,942            4,990

Other Year End Statistics:
Number of stores                             2,305          2,287            2,421           2,512            2,492
</TABLE>


     The operating  results  include two significant  restructuring  initiatives
that were implemented in 2001 and 2002 (refer to Note 6 "Restructuring" and Note
5  "Discontinued  Operations/Market  Exits"  in the  notes  to the  accompanying
consolidated financial statements). Although these initiatives were similar, the
adoption  of  Statement  of  Financial   Accounting   Standard  (SFAS)  No.  144
"Accounting for the Impairment or Disposal of Long-Lived  Assets" on February 1,
2002  caused  the  financial  statement  presentation  of  these  actions  to be
dissimilar  (SFAS No. 144 does not allow for the retroactive  application of its
provisions).  The Company's financial  statements have been restated to classify
the  results of  operations  for the 2002  restructuring  that  resulted  in the
divestiture  of 95 stores and two  distribution  centers  and the  reduction  of
division offices from 15 to 11, as discontinued  operations for all periods. The
operating  results of the 165 stores divested under the 2001  restructuring  are
included in continuing  operations of the Company's financial statements for the
periods prior to their sale or closure.

     The Company adopted SFAS No. 142 "Goodwill and Other Intangible  Assets" in
2002 (refer to Note 12 "Goodwill  and Other  Intangible  Assets" in the notes to
the accompanying consolidated financial statements).

     On June 23, 1999,  Albertsons  and American  Stores  Company  consummated a
merger, which was accounted for as a pooling of interests.


                                       14
<PAGE>


Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations.

Overview
     During the past three years, the Company announced a variety of actions and
programs the leadership team has identified and  implemented  with the intent to
drive the Company's future competitiveness, profitability and return on invested
capital.  The Company continues to be focused on its five strategic  imperatives
that serve as a guide and a filter for all the Company's initiatives.  The food,
drug and general merchandise  retailing industry continues to experience intense
competition with numerous competitors.  The Company is competing through planned
investments  in pricing and  promotion,  product  differentiation  and  customer
service. The Company's 2003 results of operations were unfavorably impacted by a
labor dispute with its retail union associates in southern California that began
on October 12, 2003 and lasted  through the  remainder of the  Company's  fiscal
year which ended on January 29, 2004 ("Labor Dispute").

     All dollar amounts in this report are in millions, except per share data.

Southern California Labor Dispute
     Pursuant to the terms of a multi-employer  bargaining arrangement among the
Company, The Kroger Co. and Safeway Inc. (the "Retailers"),  the Company "locked
out" its retail union  associates in southern  California food stores on October
12,  2003.  This  followed  the United  Food and  Commercial  Workers'  ("UFCW")
decision  to  conduct  a strike  at  Safeway  Inc.'s  southern  California  Vons
Supermarket stores on October 11, 2003.

     In   connection   with  the   decision  of  the   Retailers  to  engage  in
multi-employer  bargaining with the UFCW, the Retailers  entered into agreements
("Labor Dispute  Agreements") which provided for lock-outs in the event that any
Retailer was struck at any or all of its facilities in southern  California when
the other  Retailers were not and contained a provision  designed to prevent the
union  from  placing  disproportionate  pressure  on one  or  more  Retailer  by
picketing such Retailer(s) but not the other Retailer(s).  Payments are expected
to be made or received under the Labor Dispute  Agreements during the first half
of fiscal 2004 at which time only net amounts will be paid.

     In November 2003, three consumers filed an action in California state court
claiming  that the Labor  Dispute  Agreements  violate  antitrust  and  consumer
protection laws. In February 2004, the California Attorney General filed suit in
federal court claiming that certain  provisions of the Labor Dispute  Agreements
violate  antitrust  law. The Company  believes that similar  agreements  are not
uncommon in joint  bargaining  situations and that the Labor Dispute  Agreements
are lawful. The Company is vigorously defending itself in these proceedings.

     The Labor Dispute  resulted in decreased  sales in the  Company's  southern
California  combination food and drug and conventional food stores and decreased
margin  as a result  of  inventory  shrink,  sales  mix  changes  and  increased
distribution  costs.  The Company also incurred  additional costs for hiring and
training  temporary  workers,   travel  costs  for  temporarily  reassigned  key
associates  from other Company  divisions,  increased  store  security and legal
costs.  These impacts were  partially  offset by reduced labor  expenses and the
estimated benefit from the multi-employer  bargaining agreement discussed above.
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.  Other specific impacts of
the Labor  Dispute on the  Company's  2003 results of  operations  are discussed
below.

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's 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 consist 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.

                                       15
<PAGE>

     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 the agreements. No amounts
were outstanding under these facilities as of January 29, 2004.

Strategic Imperatives
     The Company's leadership team has identified many actions and programs with
which to drive the Company's future competitiveness, profitability and return on
invested  capital.  The Company  continues  to be focused on its five  strategic
imperatives  that  serve  as a  guide  and a  filter  for  all of the  Company's
initiatives.  These five  imperatives,  together with the major actions taken to
date, follow:

1)   Aggressive  Cost and  Process  Control.  Each  main  category  of  expense,
     including  labor,  is monitored by a member of  executive  management.  The
     Company  committed to achieve annual cost  reductions and cost avoidance of
     $750 by the end of 2004. By the end of 2003,  the Company had achieved $609
     of the $750 cost reduction  goal. In February  2004, the Company  announced
     that it had  raised its total  cost-out  goal to $1,000 by the end of 2005.
     This additional $250 in cost savings is expected to be achieved through new
     supply chain initiatives.

2)   Maximize  Return on Invested  Capital.  The Company has a formal process to
     review and measure all  significant  investments in corporate  assets.  The
     Company's  goal is to hold a number one or two market share in an area,  or
     have a plan of action which provides a reasonable  expectation of achieving
     this goal in order to continue to maintain an investment in that area. This
     process  involves  thorough  review at both the  individual  asset or store
     level and at the market area level.

     As a result  of these  reviews,  the  Company  closed  or  disposed  of 165
     underperforming  stores,  sold 80 non-core New England Osco  drugstores and
     reduced its  division  offices  from 19 to 15 in 2001.  In 2002 the Company
     exited four underperforming  markets resulting in the sale or closure of 95
     stores, two distribution  centers and the reduction of its division offices
     from 15 to 11. In 2003 the Company  closed 61  underperforming  stores.  On
     January 30, 2004, the Company announced a new  organizational  structure in
     its Dallas/Fort  Worth division  intended to eliminate layers of management
     and streamline  operations and, on February 20, 2004, the Company announced
     plans to further  consolidate  its 11  divisions to seven and add an eighth
     division to develop new formats, including price impact stores.

3)   Customer-focused  Approach to Growth. The Company intends to invest many of
     the savings  from its expense and process  control  programs  back into the
     marketplace  in order to drive sales and  earnings  growth.  The  Company's
     focus is on the  following  programs  that are  intended to drive  customer
     loyalty and profitable sales growth:


     o    A company-wide "Service First, Second to None" program to reinvigorate
          the employees' focus on customer service.
     o    The "Focus on Fresh" initiative to improve the delivery of fresh foods
          throughout the Company's fresh departments.
     o    A decade-long  development  of the dual branding  format that provides
          food and drugstore offerings in one location under multiple banners.

4)   Company-wide Focus on Technology.  Albertsons use of technology is designed
     to better  serve  customers  and improve  operating  efficiencies.  In 2002
     Albertsons  established an information technology plan, which calls for the
     replacement  or upgrade of over  three-quarters  of the  Company's  current
     systems by 2007. The Company  initiated a project that will standardize all
     front-end  point-of-sale  systems; built a new data center resulting in the
     consolidation  of two  previous  data  centers;  and started the process of
     implementing a new financial  applications  system.  In 2003, the first two
     phases of the  Company's  new  financial  system were  completed  and a new
     online recruitment tool was rolled out providing  consistent  processes and
     automation that transformed the way Albertsons  identifies,  interviews and
     hires  quality  associates  across  the  enterprise.  Technology  has  been
     deployed in approximately 384 stores in  "self-checkout"  lanes,  providing
     customers with the option to complete their shopping trips  electronically.
     The  Company  has also been  piloting a handheld  scanner  that the Company
     describes  as  the  Shop N Scan  program  that  allows  customers  to  scan
     merchandise  as they walk  through  and shop a store.  The Company has also
     invested in the technology to drive its supply chain  initiatives.  Late in
     fiscal  2003,  the Company  signed an  agreement  for several  planning and
     analytical  modules to improve supply chain efficiency.  In March 2004, the
     Company  launched a Radio  Frequency  Identification  (RFID)  test  program
     intended to improve efficiencies in consumer demand chain management.


                                       16
<PAGE>



5)   Energized  Associates.  The  Albertsons  leadership  team is  charged  with
     creating an uplifting  atmosphere for  associates  and to inspire  positive
     attitudes  throughout the Company.  To ensure that associates are energized
     and motivated to do their best work,  the Company  realigned  processes and
     programs to provide  new  opportunities  for  associates  to achieve  their
     professional  career goals.  The Company changed  compensation  programs to
     reward  performance  that  delivers  results,  improved  communications  so
     associates are better informed,  streamlined education programs to meet the
     needs  of  the  business  and  revised  benefits  plans  to  reduce  costs.
     Albertsons  is convinced  that a team of energized  associates  who share a
     positive  attitude will achieve  Albertsons  goal of becoming the best food
     and drug retailer in the world.

Results of Operations
     Sales for 2003 were  $35,436  compared  to $35,626  in 2002 and  $36,605 in
2001. The following  table sets forth certain  Statement of Earnings  components
expressed as a percent to sales and the year-to-year  percentage  changes in the
amounts of such components:

<TABLE>
<CAPTION>
                                                                                   Percentage Change
                                                      Percent To Sales             Of Dollar Amounts
----------------------------------------- -------------------------------- ------------------------------
                                               2003       2002       2001   2003 vs. 2002  2002 vs. 2001
----------------------------------------- ---------- ---------- ---------- --------------- --------------
<S>                                          <C>        <C>        <C>               <C>            <C>
Sales                                        100.00     100.00     100.00            (0.5)          (2.7)
Gross profit                                  28.59      29.13      28.48            (2.4)          (0.5)
Selling, general and administrative
   expenses                                   24.90      24.13      23.85             2.6           (1.5)
Restructuring (credits) charges               (0.03)     (0.10)      1.28            n.m.           n.m.
Gain on sale of New England Osco
   drugstores                                     -          -      (0.15)           n.m.           n.m.
Interest expense, net                          1.15       1.11       1.16             3.3           (6.8)
Earnings from continuing operations
   before income taxes                         2.56       3.94       2.36           (35.5)          62.8
Earnings from continuing operations            1.57       2.43       1.36           (35.7)          74.4
(Loss) earnings from discontinued
   operations                                     -      (0.80)      0.02            n.m.           n.m.
Cumulative effect of change in
   accounting principle, net                      -      (0.26)         -            n.m.           n.m.
Net earnings                                   1.57       1.36       1.38            14.6            3.2
    n.m. - not meaningful
</TABLE>

     Sales decreased $190 in 2003 as compared to 2002 primarily due to the Labor
Dispute. The Labor Dispute resulted in decreased sales in the Company's southern
California  combination food and drug and conventional  stores.  These decreases
were  partially  offset by an increased  number of  operating  stores in 2003 as
compared to 2002. In 2003,  identical  store sales decreased 2.8% as compared to
2002. Identical stores are defined as stores that have been in operation for two
full fiscal years. Comparable store sales, which uses the same store base as the
identical  store  sales  computation  except  it  includes  replacement  stores,
decreased  2.4% in 2003 as  compared  to  2002.  Excluding  food  stores  in the
Company's Southern  California  Division for the last 110 days of 2003 and 2002,
identical store sales  decreased 0.5% and comparable  store sales decreased 0.1%
in 2003 as compared to 2002.  Management  estimates  that  overall  inflation in
products the Company  sells was 0.5% in the 12 months ended  January 29, 2004 as
compared  to an overall  deflation  of 0.1% in the 12 months  ended  January 30,
2003.

     Despite the year to year declines in identical and comparable  store sales,
when  adjusted  for the Labor  Dispute  the  Company  saw  improvements  in both
identical and  comparable  store sales in the second half of 2003 as compared to
the first half of 2003.

     The following table reconciles  actual identical store sales and comparable
store sales to adjusted  identical  store  sales and  comparable  store sales as
presented herein. The Company presents these non-GAAP financial measures because
it believes a  comparison  of actual to  adjusted  store sales data is useful to
investors to communicate  management's belief of the impact of the Labor Dispute
on trends in sales experienced during the last 110 days of 2003.

                                       17
<PAGE>

<TABLE>
<CAPTION>
                                                       Actual Identical       Labor                Adjusted
                                                         Store Sales         Dispute               Identical
                                                                           Adjustment             Store Sales
------------------------------------------------------ ------------------ --------------- ----- ------------------
  <S>                                                       <C>               <C>          <C>        <C>
  52 weeks ended January 29, 2004                           $ 33,142          $ (  718)    (1)        $ 32,424
  52 weeks ended January 30, 2003                             34,104            (1,520)    (2)          32,584
------------------------------------------------------ ------------------ --------------- ----- ------------------
  Year to year change                                           (962)                                     (160)
  52 weeks ended January 30, 2003                             34,104                                    32,584
------------------------------------------------------ ------------------ --------------- ----- ------------------
  Identical store sales percentage change                       (2.8)%                                    (0.5)%
====================================================== ================== =============== ===== ==================
</TABLE>


<TABLE>
<CAPTION>
====================================================== ================== =============== ===== ==================
                                                            Actual            Labor                Adjusted
                                                          Comparable         Dispute              Comparable
                                                         Store Sales       Adjustment             Store Sales
------------------------------------------------------ ------------------ --------------- ----- ------------------
  <S>                                                       <C>               <C>          <C>        <C>
  52 weeks ended January 29, 2004                           $ 33,705          $ (  727)    (3)        $ 32,978
  52 weeks ended January 30, 2003                             34,547            (1,534)    (4)          33,013
------------------------------------------------------ ------------------ --------------- ----- ------------------
  Year to year change                                           (842)                                     ( 35)
  52 weeks ended January 30, 2003                             34,547                                    33,013
------------------------------------------------------ ------------------ --------------- ----- ------------------
  Comparable store sales percentage change                      (2.4)%                                    (0.1)%
====================================================== ================== =============== ===== ==================
</TABLE>


(1) Represents the identical  Southern  California  Division food store sales in
2003 during the last 110 days of the fiscal year ended  January  29,  2004.
(2) Represents the identical  Southern  California  Division food store sales in
2002 during the last 110 days of the fiscal year ended January 30, 2003.
(3) Represents the comparable  Southern  California Division food store sales in
2003 during the last 110 days of the fiscal year ended January 29, 2004.
(4) Represents the comparable  Southern  California Division food store sales in
2002 during the last 110 days of the fiscal year ended January 30, 2003.

     During 2003 the Company  opened 50  combination  food and drug  stores,  27
stand-alone  drugstores,  two  conventional  and  warehouse  stores  and 29 fuel
centers.  The Company  closed or sold 15  combination  food and drug stores,  18
conventional  stores and 28 stand-alone  drugstores.  The Company also remodeled
192 stores. Net retail square footage of continuing  operations was 94.0 million
square feet at the end of 2003 as compared to 92.1 million square feet in 2002.

     Sales  decreased  in  2002  as  compared  to  2001  due  to  the  Company's
restructuring  activities  initiated in July 2001. In 2001 the Company announced
closure of 165 stores in  addition to selling 80 New  England  Osco  drugstores.
These 245 stores'  sales are included in 2001 and 2002  operating  results until
their  actual  closure  or  disposition.  Sales in 2002  were also  impacted  by
declining  consumer  confidence,  as measured by The Conference  Board Index, of
78.8  in  January  2003 as  compared  to 97.8 in  January  2002  and  escalating
competitive  activity.  Identical and comparable  store sales decreased 0.9% and
0.4%,  respectively,  in 2002 as compared  to 2001.  Management  estimates  that
overall  deflation in products the Company sells was 0.1% and 0.3% in the twelve
months ended January 30, 2003 and January 31, 2002, respectively.

     During 2002 the Company  opened 59  combination  food and drug  stores,  31
stand-alone  drugstores,  two  conventional  and  warehouse  stores  and 46 fuel
centers.  The Company closed or sold 140  combination  food and drug stores,  32
conventional  and  warehouse  stores,  54  stand-alone  drugstores  and 50  fuel
centers.  The Company also  remodeled 207 stores.  Net retail square  footage at
continuing  operations  was  92.1  million  square  feet  at the  end of 2002 as
compared to 92.8 million square feet at the end of 2001.

     Gross profit, as a percent to sales,  decreased in 2003 as compared to 2002
due to decreased  sales leverage as a result of the Labor Dispute and continued,
planned  investments  in pricing and promotion in key markets and  categories to
drive sales growth and market share.  These investments were partially offset by
savings generated from strategic sourcing initiatives,  increased pharmacy gross
margins as a result of a new supply contract and higher generic substitution and
increased private label sales growth.

     Gross profit, as a percent to sales,  increased in 2002 as compared to 2001
as a result of improved Company-wide  procurement practices,  increased pharmacy
margins due to higher  generic  substitutions  and the  Company's  restructuring
activities  in  2002  and  2001,  which  included  the  sale or  closure  of 245
underperforming stores.

                                       18
<PAGE>

     Selling,  general and administrative  (SG&A) expenses as a percent to sales
increased in 2003 as compared to 2002.  This  increase was  attributable  to the
lack of sales  leverage due to the Labor Dispute as well as higher  depreciation
costs  associated  with  the  Company's  continued   investment  in  information
technology  and  store  development;  increased  compensation  costs;  increased
workers compensation costs, primarily due to actual costs of prior years' claims
exceeding  prior years'  estimated  costs;  increased  employee  benefit  costs,
primarily  due to  increases in Company and union  sponsored  health and welfare
plans and increased  pension charges,  partially offset by a $36 gain associated
with the curtailment of postretirement  medical benefits for employees  retiring
after June 1, 2004; and contingent lease charges. The increased employee benefit
costs  experienced  during the year were due, in part, to increases in mandatory
contributions  to  multi-employer  health  care and  pension  plans to which the
Company  contributes.  Contribution  amounts are established under the Company's
collective bargaining agreements, which are up for renewal at varying times over
the next  several  years.  If the health care and  pension  plan  provisions  of
certain of these collective  bargaining  agreements  cannot be renegotiated in a
manner that reduces the prospective health care and pension costs of the Company
as the Company  intends,  the  Company's  selling,  general  and  administrative
expenses could continue to increase, possibly significantly, in the future.

     The increase in SG&A  expenses as a percent to sales in 2002 as compared to
2001 was primarily due to the reduction in the Company's  sales base as a result
of the 2001 restructuring  activities, an increase in employee benefit costs due
to mandatory contributions to multi-employer health and welfare plans and rising
workers'  compensation  costs.  These  increases  were  partially  offset by the
elimination of goodwill amortization in 2002 due to the adoption of SFAS No. 142
and a reduction in labor costs.

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

     Interest  expense,  net,  during 2003 totaled $409 as compared with $396 in
the  prior  year.  This  increase  was   attributable  to  less  interest  being
capitalized on  construction  projects  during 2003. The decrease in capitalized
interest  was  due  to  an  overall  reduction  in  the  capital   expenditures,
particularly  for new  stores.  Interest  expense,  net,  was $425 in 2001.  The
decrease in 2002 from 2001 was due to lower  average debt  balances  outstanding
from year to year.

     Earnings from continuing  operations were $556 in 2003 compared to earnings
from continuing operations of $865 for 2002. This decrease was due to lost sales
and  earnings  associated  with  the  Labor  Dispute,   decreased  gross  margin
associated with planned  investments in pricing and promotion and an increase in
depreciation,  compensation  costs,  workers'  compensation  costs and  employee
benefits  costs.  Earnings from  continuing  operations  were $496 in 2001.  The
increase in income from  continuing  operations  in 2002 as compared to 2001 was
primarily attributable to the restructuring charges taken in 2001 related to the
sale  and  closure  of  165   underperforming   retail   stores,   reduction  of
administrative  and corporate overhead and consolidation and elimination of four
division offices.

     The Company's effective income tax rate from continuing operations for 2003
was 38.6%,  as  compared to 38.4% for 2002 and 42.6% for 2001.  The  decrease in
2002 as  compared  to  2001  was  the  result  of the  elimination  of  goodwill
amortization.

     Net earnings were $556 or $1.51 per diluted share for 2003, compared to net
earnings of $485 or $1.22 per diluted share for 2002.  The  improvement  in 2003
was a result of a charge of $379 in 2002 related to a strategic decision to exit
underperforming markets and a charge of $94 in 2002 related to the adoption of a
new accounting  principle for the recognition of vendor funds,  partially offset
by the reduction in earnings from  continuing  operations in 2003 as a result of
the Labor Dispute. Net earnings were $501 or $1.23 per diluted share for 2001.

Restructuring and Discontinued Operations
     The  financial   statement   presentation   includes  the  results  of  two
significant restructuring initiatives that were implemented in 2001 and 2002. In
July 2001, the Company's Board of Directors  approved a restructuring  plan that
included  the  closure  of  165  underperforming  retail  stores,  reduction  of
administrative  and corporate overhead and consolidation and elimination of four
division  offices  (refer  to  Note  6  "Restructuring"  in  the  notes  to  the
accompanying  consolidated financial  statements).  In March 2002, the Company's
Board of Directors  approved the second  phase of the  restructuring  plan which
included the complete exit of four underperforming markets resulting in the sale
or closure of 95 stores and two  distribution  centers and reduction of division
offices from 15 to 11 (refer to Note 5 "Discontinued Operations/Market Exits" in
the notes to the accompanying  consolidated financial statements).  Although the
initiatives  were  similar,  the  adoption of SFAS No. 144  "Accounting  for the

                                       19
<PAGE>

Impairment or Disposal of Long-Lived Assets" on February 1, 2002 resulted in the
financial statement presentation of these actions to be dissimilar (SFAS No. 144
does not allow for the retroactive application of its provisions). The Company's
2002 and 2001 financial statements classify the results of operations for the 95
stores  and  two  distribution  centers  divested  in  the  2002  initiative  as
discontinued operations. The operating results of the 165 stores divested in the
2001 initiative and the  restructuring  charges  associated with the decision to
sell or  close  those  stores  are  included  in  continuing  operations  of the
Company's financial statements for the periods prior to their sale or closure.

Phase 1: 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  under this
restructuring  plan.  In 2002,  management  revised  the  planned  restructuring
activities as follows: the store fixture manufacturing  operation's  performance
was  re-evaluated  and  determined  to be more  cost-effective  than  purchasing
like-fixtures from external sources in the future, so it would be held and used;
one store's operating performance improved due to local market conditions, so it
would  also be  held  and  used;  and one  part  of the  transaction  processing
consolidation  was halted  due to a decision  to  replace  the  Company's  human
resource  information  systems  (HRIS) to be  completed by 2006.  All  remaining
stores in this restructuring plan were sold or closed by 2003.


                                       20
<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                                TOTAL CHARGES
                                                       CHARGES               ACCRUALS             (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 Sheets.

Phase 2: 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 operating results and gains and losses
related to these market exits have been included in  discontinued  operations in
the Company's  Consolidated  Earnings. The prior years' operating activities for
these 95 stores, two distribution centers and reduction of division offices from
15 to 11 have been reported as 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.


                                       21
<PAGE>

<TABLE>
<CAPTION>
                                                       NONCASH               ACCRUALS         TOTAL CHARGES
                                                       CHARGES                                    (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  balances of $8 at January 29, 2004 and $11 at January 30, 2003
are included in other current liabilities in the Company's  Consolidated Balance
Sheets.

     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.  In addition,  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.

Liquidity and Capital Resources
     Cash provided by operating  activities during 2003 was $1,545,  compared to
$2,060 in 2002 and $2,009 in 2001.  The  decrease in cash  provided by operating
activities  in 2003 as  compared  to 2002 was  primarily  due to lower  earnings
before  interest,   taxes,   depreciation   and  amortization   from  continuing
operations, a reduction in accounts payable due to lower inventory purchases and
inventory  turns in the Southern  California  Division  directly  related to the
Labor  Dispute and  increased  inventory  levels as a result of increased  store
count.  These uses of cash were partially offset by a reduction in the Company's
current  income  tax  payable  as a result  of  implementation  of tax  planning
initiatives  in 2003. In 2002,  cash flows from  operations  increased  slightly
primarily  as the result of better  inventory  leverage  in 2002 as  compared to
2001.  With the resolution of the Labor Dispute,  management  expects  operating
cash flows in 2004 to increase slowly as affected stores rebuild market share in
southern California.

     Cash flow used in investing  activities for 2003 increased to $926 compared
to $662 in 2002.  This increase was a result of 2002 investing  activities  that
included  proceeds from the sale of assets  (primarily  associated with the 2001
restructuring  activities and the 2002 market exits) that were $488 greater than
asset  sale  proceeds  received  in 2003,  partially  offset  by  lower  capital
expenditures in 2003. Capital expenditures  declined $265 in 2003 as compared to
2002,  primarily due to amounts invested in new store and store remodels in 2003
being partially offset by increased expenditures on information technology.  The
Company expects capital  expenditures  in 2004 to be  approximately  $300 higher
than those in 2003 due to the proposed  acquisition of Shaw's and expects  other
investing related activities to remain level.

                                       22
<PAGE>


     Cash flows used in investing  activities in 2002 decreased $418 as compared
to 2001 primarily due to cash received from the sale of assets  associated  with
the 2001 restructuring and 2002 market exits. Capital expenditures decreased $96
due to  reduced  spending  on new  store  construction  and  store  acquisitions
partially   offset  by  increased   spending  on  existing  store  upgrades  and
remodeling.

     The  Company's  financing  activities  for  2003,  2002 and  2001  included
payments on  long-term  borrowings,  stock  purchased  and retired and  dividend
payments. Cash flow used in financing activities in 2003 was $492 as compared to
$1,297  and $905 in 2002 and  2001,  respectively.  The  primary  difference  in
financing  activity  cash flows was the  Company's  decision to  purchase  fewer
shares of its common stock in 2003. In 2002,  the Company  purchased $862 of its
common stock as compared to $108 in 2003.

     The Board of Directors,  at its March 2004 meeting,  maintained the regular
quarterly  cash  dividend of $0.19 per share,  for an  effective  annual rate of
$0.76 per share.

     The Company utilizes its commercial paper and bank line programs  primarily
to supplement cash requirements for seasonal fluctuations in working capital and
to fund its capital expenditure program. Accordingly,  commercial paper and bank
line borrowings will fluctuate  between  reporting  periods.  The Company had no
commercial  paper or bank line  borrowings  outstanding  at January  29, 2004 or
January 30, 2003. The Company expects to use commercial  paper to fund a portion
of the purchase price for Shaw's.

     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 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.

     Albertsons  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.  During 2002 and 2003, no securities were issued under
the  2001  Registration  Statement.  As of  January  29,  2004,  $2,400  of debt
securities remain available for issuance under the 2001 Registration  Statement;
however,  there can be no assurance  that the Company will be able to issue debt
securities under this registration statement at terms acceptable to the Company.

     During 2002,  the Company  purchased and retired 35.1 million shares of its
common stock for $862, at an average price of $24.54 per share. During 2003, the
Company  repurchased  5.3  million  shares  of  its  common  stock  for a  total
expenditure  of $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.

     The Company's  operating results continue to enhance its financial position
and  ability  to  continue  its  internal  expansion  program.  Cash  flows from
operations and available  borrowings are adequate to support  currently  planned
business operations, stock repurchases and capital expenditures. The Company has
short-term  financing  capacity  in the form of  commercial  paper or bank  line
borrowings  up to $1,400  and  long-term  capacity  under the 2001  Registration
Statement of $2,400.  The Company  intends to use a combination of  cash-on-hand
and commercial paper to finance the acquisition of Shaw's.


                                       23
<PAGE>
     As of January 29, 2004, the Company's credit ratings were as follows:

<TABLE>
<CAPTION>
                                             S & P             Moody's           Fitch
     ----------------------------------- ----------------- ----------------- -----------------
         <S>                                 <C>               <C>               <C>
         Long-term debt                      BBB               Baa2              BBB
         Short-term debt                     A2                P2                F2
</TABLE>

     The Company does not have any credit rating  downgrade  triggers that would
accelerate repayment in the Company's fixed-term debt portfolio were a downgrade
in the  Company's  credit  ratings  to  occur.  Similarly,  a  downgrade  in the
Company's  credit  ratings  would not  affect  the  Company's  ability to borrow
amounts under the revolving credit facilities.  However,  any adverse changes to
the Company's  credit  ratings would  increase the cost of borrowings  under the
Company's credit facilities.  In addition, a downgrade could limit the Company's
ability to issue  commercial  paper.  Should this occur,  the Company might seek
alternative  sources of  funding,  including  the  issuance  of notes  under the
existing shelf registration statements. In addition, up to $1,400 could be drawn
upon from the Company's senior unsecured credit facilities. The Company does not
anticipate the acquisition of Shaw's to have an impact on its credit ratings.

Contractual Obligations, Commercial Commitments and Guarantees

Contractual Obligations
     The  Company  enters  into a variety of  legally  binding  obligations  and
commitments  in the normal course of its business.  The table below presents the
Company's long-term contractual obligations and commitments which are considered
to  represent  known future cash  payments  that the Company will be required to
make  under  existing  contractual  arrangements.  Some  amounts  are  based  on
management's  estimates and assumptions and amounts  actually paid may vary from
those reflected in the table.

<TABLE>
<CAPTION>
                Contractual Obligation                                 Payments Due By Period
-------------------------------------------------------- ---------------------------------------------------
                                                                                                   2009 and
                                                  Total         2004   2005 - 2006  2007 - 2008  Thereafter
--------------------------------------- ---------------- ----------- -------------- ------------ -----------
<S>                                             <C>           <C>           <C>          <C>        <C>
Long-term debt, including current
portion (1)                                     $ 4,958       $  506        $  208       $   74     $ 4,170
Capital lease obligations (2)                       865           53            96           93         623
Operating leases (2)                              3,765          349           628          531       2,257
Purchase obligations (4)
   Utilities (3)                                    148           68            80            -           -
   Contracts for purchase of property
   and construction of buildings                     99           98             1            -           -
  Transportation contracts                           80           80             -            -           -
Other
   Self insurance liability                         731          262           237          105         127
   Compensation and benefits                        530           56            91           28         355
   Other long-term liabilities                       13            8             5            -           -
--------------------------------------- ---------------- ------------ ------------- ------------ -----------
Total contractual cash obligations              $11,189       $1,480        $1,346       $  831     $ 7,532
======================================= ================ ============ ============= ============ ===========
</TABLE>

     (1)  The Company has  medium-term  notes and  debentures  that  contain put
          options that would require the Company to repay borrowed amounts prior
          to maturity.  Medium-term notes of $30 and $50 mature in July 2027 and
          April 2028,  respectively,  and have put options  exercisable  in July
          2007 and April 2008,  respectively.  Debentures  in the amount of $200
          mature in May 2037 and have a put option  exercisable in May 2009. For
          the  purpose of the table  above,  payments of these  obligations  are
          assumed to occur at maturity.
     (2)  Represents  the minimum rents payable and includes  leases  associated
          with closed stores accrued for under the Company's  restructuring  and
          closed  store  reserves.  Amounts are not offset by expected  sublease
          income.
     (3)  The Company has entered into supply  contracts  to purchase  specified
          quantities  of  electricity  and natural gas that have terms  through
          2006. The amounts  included in the table reflect  projected  purchases
          based on historical usage and contracted rates.
     (4)  In addition to the contracts  noted in this table,  the Company enters
          into supply contracts to purchase  products for resale in the ordinary
          course of business. This category of contracts covers a broad spectrum
          of products and sometimes includes specific merchandising  obligations
          relative to those products.  These supply contracts  typically include
          either a volume  commitment or a fixed expiration date;  pricing terms
          based on the vendor's  published list price;  termination  provisions;
          and other standard contractual considerations. There are a significant
          number of these contracts,  however they are typically cancelable upon
          return of  unearned  allowances  and  therefore  no amounts  have been
          included above.

                                       24
<PAGE>

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.

     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.

Off Balance Sheet Arrangements
     At January 29, 2004, the Company had no significant  investments  that were
accounted for under the equity method in accordance with  accounting  principles
generally  accepted in the United  States.  Investments  that were accounted for
under the equity method at January 29, 2004, had no liabilities  associated with
them that were guaranteed by or that would be considered material to Albertsons.
Accordingly, the Company does not have any off balance sheet arrangements with
unconsolidated entities.

Capital Expenditures
     The  Company is  committed  to keeping  its stores up to date.  In the last
three years, the Company has opened or remodeled 693 stores, representing 32% of
the  Company's  retail  square  footage as of January 29,  2004.  The  following
summary of historical  capital  expenditures  includes  capital  leases,  stores
acquired in business and asset  acquisitions  and assets  acquired  with related
debt:
<TABLE>
<CAPTION>
                                                                        2003         2002        2001
---------------------------------------------------------------- ------------ ------------ -----------
<S>                                                                 <C>           <C>         <C>
New and acquired stores                                             $    371      $   688     $   875
Remodels                                                                 345          455         348
Retail replacement equipment, technology and other                       387          221         247
Distribution facilities and equipment                                     53           70          64
---------------------------------------------------------------- ------------ ------------ -----------
Total capital expenditures                                          $  1,156      $ 1,434     $ 1,534
================================================================ ============ ============ ===========
</TABLE>

     Total capital  expenditures  include capitalized lease obligations incurred
of $62 in 2003, $75 in 2002 and $79 in 2001.

                                       25
<PAGE>

     The Company's  financial  position provides the flexibility for the Company
to grow  through  its store  development  program and future  acquisitions.  The
Company's  capital  expenditure  budget  for 2004 is  approximately  $1,300  and
includes approximately $100 in new capital and operating lease obligations.  The
Company expects  capital  expenditures  to be  approximately  $300 higher if the
proposed acquisition of Shaw's is consummated.

Related Party Transactions
     Transactions with related parties were not considered material. See Note 20
"Related Party Transactions" in the Notes to Consolidated Financial Statements.

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

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

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.

     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  guidance,  the  Company  began
recognizing the 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.  Vendor
funds that have been earned as a result of completing  the required  performance
under the terms of the  underlying  agreements but for which the product has not
yet been sold are  recognized as  reductions of inventory.  The amount of vendor
funds remaining in ending inventory requires  management judgment and estimates.
Management estimates these amounts based on the average inventory turnover rates
by product  category for the Company's  grocery,  general  merchandise and lobby
departments  and by  average  inventory  turnover  rates by  department  for the
Company's remaining inventory. 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.


                                       26
<PAGE>

LONG-LIVED ASSET IMPAIRMENTS The Company regularly reviews long-lived assets for
indicators  of  impairment.  Management's  judgments  regarding the existence of
impairment indicators are based on operational performance.  Future events could
cause management to conclude that impairment indicators exist and that the value
of  long-lived  assets is  impaired.  When  events or changes  in  circumstances
indicate  that  the  carrying  value  of an  asset  or an  asset  group  is  not
recoverable,  the fair value of the asset is  compared  to its  carrying  value.
Impairment  losses are measured as the amount by which the carrying value of the
asset exceeds its estimated  fair value.  The estimated fair value of the assets
is 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 have closed and are under  long-term  operating  lease
agreements,  the  present  value of any  remaining  liability  under the  lease,
discounted  using credit  risk-free rates and net of estimated  sublease rentals
that could be reasonably obtained for the property, is recognized as a liability
and charged to operations. 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 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.

GOODWILL  The Company  adopted  SFAS No.  142,  "Goodwill  and Other  Intangible
Assets," in 2002. 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.

SELF-INSURANCE The Company is primarily self-insured for property loss, workers'
compensation,  automobile  liability  costs and  general  liability  costs.  The
Company records its self-insurance liability,  determined actuarially,  based on
claims  filed and an  estimate  of claims  incurred  but not yet  reported.  Any
actuarial  projection  of  ultimate  losses  is  subject  to a  high  degree  of
variability.  Sources of this variability are numerous and include,  but are not
limited to, future development of previous claims,  future economic  conditions,
court decisions and legislative actions. For example, workers compensation costs
were $361,  $282 and $224 in 2003, 2002 and 2001  respectively.  The increase in
costs was primarily  attributable  to development of prior year claims that were
higher  than   previously   estimated   while  the  annual  number  of  workers'
compensation claims has decreased year to year.

     The Company's workers'  compensation  liabilities are from claims occurring
in various  states.  Individual  state workers'  compensation  regulations  have
received a tremendous  amount of  attention  from state  politicians,  insurers,
employers  and  providers,  as well as the public in general.  Recent years have
seen an escalation in the number of legislative  reforms,  judicial  rulings and
social  phenomena  affecting  workers'  compensation.  The  changes in a state's
political and economic  environment increase the variability in the unpaid claim
liabilities. The Company's workers' compensation reserves do not contemplate any
of these potential developments.

LEGAL  CONTINGENCIES The Company records reserves for legal  contingencies  when
the  information  available to the Company  indicates that it is probable that a
liability  has been  incurred  and the  amount  of the  loss  can be  reasonably
estimated.  Predicting  the  outcomes of claims and  litigation  and  estimating
related costs and exposures involve  substantial  uncertainties that could cause
actual  costs to vary  materially  from  estimates.  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.

PENSION COSTS Pension benefit  obligations and the related effects on operations
are dependent on the Company's selection of actuarial assumptions, including the
discount rate and the expected  long-term rate of return on plan assets.  Actual
returns on plan assets  exceeded return  assumptions  over an extended period in
the past,  which kept  pension  expense and cash  contributions  to the plans at
modest levels.  Weaker market  performance may  significantly  increase  pension
expense and cash contributions in the future. Changes in the interest rates used
to determine the discount rate may also cause  volatility in pension expense and
cash  contributions.  Actual results that differ from the Company's  assumptions

                                       27
<PAGE>

are  accumulated  and amortized  over future periods and,  therefore,  generally
affect the Company's  recognized expense and recorded  obligation in such future
periods.  For example,  in 2003 the Company's discount rate assumption was 6.15%
and its long-term asset return assumption was 8.0%. Using these assumptions, the
Company's  2003 pension  expense was $30,  following  expense of $12 in 2002 and
income of $9 in 2001. If the Company had  decreased its estimated  discount rate
to 5.9% and its  expected  return on plan  assets to 7.5%,  the  Company's  2003
pension  expense  would  have been $37 and net  earnings  would  have  decreased
approximately  $4. If the Company had increased its discount rate  assumption to
6.4% and its expected  return on plan assets to 8.5%, 2003 pension expense would
have been $24 and net earnings would have increased approximately $4.

Recently Issued and 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.

     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 18
"Employee Benefit Plans".

                                       28
<PAGE>

Environmental
     The  Company  has  identified  environmental  contamination  sites  related
primarily to underground  petroleum storage tanks and groundwater  contamination
at various store,  warehouse,  office and manufacturing  facilities  (related to
current  operations as well as previously  disposed of properties).  The Company
conducts an ongoing  program for the  inspection and evaluation of potential new
sites and the  remediation  and  monitoring  of  contamination  at existing  and
previously   owned  sites.   Although  the  ultimate   outcome  and  expense  of
environmental  remediation is uncertain,  the Company believes that the costs of
required  remediation  and continuing  compliance  with  environmental  laws, in
excess of  current  reserves,  will not have a  material  adverse  effect on the
financial  condition,  results  of  operations  or cash  flows  of the  Company.
Environmental remediation costs were not material in 2003, 2002 or 2001.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

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

     The Company is subject to  interest  rate risk on its fixed  interest  rate
debt  obligations.  The  fair  value of debt  with a fixed  interest  rate  will
increase  as  interest  rates fall and the fair value will  decrease as interest
rates rise.

     As of January  29,  2004 and January 30,  2003,  the Company had no foreign
exchange exposure and no outstanding derivative transactions. There have been no
material  changes in the primary risk exposures or management of the risks since
the prior year.  The Company  expects to continue to manage risks in  accordance
with the current policy.

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

<TABLE>
<CAPTION>
                                                                         There-                    Fair
                        2004     2005      2006     2007       2008       After       Total       Value
--------------------- -------- -------- --------- -------- ---------- ----------- ----------- -----------
<S>                    <C>      <C>       <C>      <C>       <C>        <C>         <C>        <C>
Fixed rate debt        $ 506    $ 206     $   2    $  12     $   62     $ 4,170     $ 4,958     $ 5,491
  Obligations
Weighted average
  interest rate          6.7%     7.3%      8.5%     6.9%       6.6%        7.6%        7.4%          -

</TABLE>

                                       29

<PAGE>


Item 8.  Financial Statements and Supplementary Data.

Albertson's, Inc.
Index to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                                               Page
                                                                                               Number
<S>                                                                                              <C>
Independent Auditors' Report                                                                     31
Consolidated Earnings for the fiscal years ended January 29, 2004, January 30, 2003 and
   January 31, 2002                                                                              32
Consolidated Balance Sheets at January 29, 2004 and January 30, 2003                             33
Consolidated Cash Flows for the fiscal years ended January 29, 2004, January 30, 2003 and
   January 31, 2002                                                                              34
Consolidated Stockholders' Equity for the fiscal years ended January 29, 2004, January 30,
   2003  and January 31, 2002                                                                    35
Notes to Consolidated Financial Statements                                                       36
</TABLE>


                                       30
<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


                                       31
<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

                                       32
<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


                                       33
<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


                                       34
<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




                                       35
<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.


                                       36
<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.


                                       37
<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.


                                       38
<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.


                                       39
<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.


                                       40
<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.


                                       41
<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.

                                       42
<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.

                                       43
<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.



                                       44
<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.


                                       45
<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.


                                       46
<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.


                                       47
<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>
                                       48
<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.


                                       49
<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.


                                       50
<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.


                                       51
<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.

                                       52
<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).

                                       53
<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>
     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.
                                       54
<PAGE>

     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.

                                       55
<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>
                                       56
<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.

                                       57
<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.

                                       58
<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.

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

                                       59
<PAGE>

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>

Item 9. Change In and Disagreements with Accountants on Accounting and Financial
Disclosure.

    None.

Item 9A.  Controls and Procedures.

     Management of the Company,  including the Chief Executive Officer and Chief
Financial  Officer of the  Company,  have  evaluated  the  effectiveness  of the
Company's  disclosure  controls and  procedures (as defined in Rule 13a-15(e) of
the  Securities  Exchange  Act of 1934) as of January  29,  2004.  Based on this
evaluation,  the Chief Executive  Officer and Chief Financial  Officer concluded
that the Company's  disclosure  controls and procedures are effective to provide
reasonable assurance that information required to be disclosed by the Company in
the reports that it files or submits under the  Securities  Exchange Act of 1934
is  recorded,  processed,  summarized  and  reported  within  the  time  periods
specified by the Securities  and Exchange  Commission's  rules and forms.  There
were no changes in the Company's internal control over financial  reporting that
occurred during the Company's most recently  completed  fiscal quarter that have
materially  affected,  or  are  reasonably  likely  to  materially  affect,  the
Company's internal control over financial reporting.

                                       60
<PAGE>
                                    PART III


Item 10.  Directors and Executive Officers of the Registrant.

     The  information  regarding  directors  and nominees  for  directors of the
Company  is  presented  under the  headings  "Board  of  Directors  -  Corporate
Governance"  and  "Election of  Directors"  in the  Company's  definitive  proxy
statement for use in  connection  with the 2004 Annual  Meeting of  Shareholders
(the "Proxy  Statement") to be filed within 120 days after the Company's  fiscal
year ended January 29, 2004.  The  information  contained  under this heading is
incorporated  herein  by  this  reference  thereto.  Information  regarding  the
executive officers of the Company is included in this Annual Report on Form 10-K
as Item 3A of Part I as permitted by  Instruction 3 to Item 401(b) of Regulation
S-K.

     The  Company  has  adopted  a code of  ethics  that  applies  to its  Chief
Executive Officer,  Chief Financial Officer and Controller.  This code of ethics
is available on the Company's Web site at www.albertsons.com.


Item 11.  Executive Compensation.

     Information  concerning  executive  compensation  is  presented  under  the
headings  "Compensation  of Executive  Officers - Summary  Compensation  Table,"
"Compensation of Executive Officers - Aggregated Option Exercises in Last Fiscal
Year and Fiscal Year-End Option Values,"  "Compensation of Executive  Officers -
Option Grants In Last Fiscal Year," and  "Compensation  of Executive  Officers -
Retirement  Benefits" in the Proxy Statement.  Information  concerning  director
compensation   is  presented   under  the  heading   "Election  of  Directors  -
Compensation of Directors" in the Proxy  Statement.  The  information  contained
under these headings is incorporated herein by this reference thereto.


Item 12.  Security  Ownership of Certain  Beneficial  Owners and  Management and
Related Stockholder Matters.

     Information with respect to security ownership of certain beneficial owners
and management is set forth under the heading  "Voting  Securities and Principal
Holders  Thereof" in the Proxy  Statement.  Information  with  respect to equity
compensation  plans is set forth under the heading  "Compensation  of  Executive
Officers - Equity  Compensation  Plan  Information" in the Proxy Statement.  The
information  contained  under  these  headings  is  incorporated  herein by this
reference thereto.


Item 13.  Certain Relationships and Related Transactions.

     Information  concerning related transactions is presented under the heading
"Certain  Transactions" in the Proxy Statement.  The information contained under
this heading is incorporated herein by this reference thereto.


Item 14.  Principal Accountant Fees and Services.
     Information  concerning principal accountant fees and services is presented
under  the  heading  "Principal  Accountant  Fees  and  Services"  in the  Proxy
Statement.  The information  contained under this heading is incorporated herein
by this reference thereto.

                                       61
<PAGE>

                                     PART IV


Item 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.


     (a) The following documents are filed as part of this report:

               1)   Consolidated Financial Statements: See Index to Consolidated
                    Financial Statements at Item 8 on page 30 of this report.

               2)   Financial Statement Schedules: No schedules are required.

               3)   Exhibits are  incorporated  herein by reference or are filed
                    with this  report as set forth in the Index to  Exhibits  on
                    pages 65 through 73 hereof.


     (b)  The following  reports on Form 8-K were filed or furnished  during the
          quarter ended January 29, 2004:

               1)   Current report on Form 8-K dated November 13, 2003 furnished
                    pursuant to Item 9, Regulation FD Disclosure,  regarding the
                    Company's fiscal year 2003 earnings guidance.

               2)   Current  report on Form 8-K dated December 5, 2003 furnished
                    pursuant to Item 12,  Results of  Operations  and  Financial
                    Condition,  including  the  Company's  press  release  which
                    discussed  the  Company's  sales and  earnings for the third
                    quarter of 2003.




                                       62
<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:  March 26, 2004


                                       63
<PAGE>


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities indicated as of March 26, 2004.
<TABLE>
<S>                                                 <C>

         \S\ Lawrence R. Johnston                                \S\ Felicia D. Thornton
---------------------------------------------       -----------------------------------------------
           Lawrence R. Johnston                                    Felicia D. Thornton
      (Chairman of the Board, Chief                             (Executive Vice President
     Executive Officer, President and                          and Chief Financial Officer)
                Director)


           \S\ Peter F. Collins                                      \S\ A. Gary Ames
---------------------------------------------       -----------------------------------------------
             Peter F. Collins                                          A. Gary Ames
          (Group Vice President                                         (Director)
             and Controller)


           \S\ Cecil D. Andrus                                     \S\ Pamela G. Bailey
---------------------------------------------       -----------------------------------------------
             Cecil D. Andrus                                         Pamela G. Bailey
                (Director)                                              (Director)



             \S\ Teresa Beck                                       \S\ Henry I. Bryant
---------------------------------------------       -----------------------------------------------
               Teresa Beck                                           Henry I. Bryant
                (Director)                                              (Director)


           \S\ Paul I. Corddry                                      \S\ Bonnie G. Hill
---------------------------------------------       -----------------------------------------------
             Paul I. Corddry                                          Bonnie G. Hill
                (Director)                                              (Director)


            \S\ Jon C. Madonna                                    \S\ Beth M. Pritchard
---------------------------------------------       -----------------------------------------------
              Jon C. Madonna                                        Beth M. Pritchard
                (Director)                                              (Director)


            \S\ Beatriz Rivera
---------------------------------------------       -------------------------------------------
              Beatriz Rivera                                           J. B. Scott
                (Director)                                              (Director)


            \S\ Will M. Storey
---------------------------------------------
              Will M. Storey
                (Director)

</TABLE>



                                       64

<PAGE>


                                Index to Exhibits
                          Filed with the Annual Report
                              on Form 10-K for the
                           Year Ended January 29, 2004


Number    Description
------    -----------

3.1       Restated  Certificate of  Incorporation  (as amended) is  incorporated
          herein by reference to Exhibit 3.1 of Form 10-Q for the quarter  ended
          April 30, 1998.

3.1.1     Certificate of Designation,  Preferences and Rights of Series A Junior
          Participating  Preferred Stock is incorporated  herein by reference to
          Exhibit 3.1.1 of Form 10-K for the year ended January 30, 1997.

3.1.2     Amendment to Certificate  of  Designation,  Preferences  and Rights of
          Series A Junior  Participating  Preferred Stock is incorporated herein
          by reference to Exhibit  3.1.2 of Form 10-K for the year ended January
          28, 1999.

3.2       By-Laws amended on March 15, 2001 and December 5, 2003.

4.1       Stockholder Rights Plan Agreement is incorporated  herein by reference
          to  Exhibit  1 of Form  8-A  Registration  Statement  filed  with  the
          Commission on March 4, 1997.

4.1.1     Amendment  No.  One  to  Stockholder   Rights  Plan  Agreement  (dated
          August 2, 1998)is incorporated herein by reference to Exhibit 4.1(b)of
          Amendment to Form 8-A Registration Statement filed with the Commission
          on August 6, 1998.

4.1.2     Amendment  No.  Two  to  Stockholder   Rights  Plan  Agreement  (dated
          March 16, 1999) is incorporated  herein by  reference  to Exhibit 3 of
          Amendment to Form 8-A Registration Statement filed with the Commission
          on March 25, 1999.

4.1.3     Amendment  No.  Three to  Stockholder  Rights  Plan  Agreement  (dated
          September 26, 2003) is  incorporated  herein by reference to Exhibit 6
          of  Amendment  to Form  8-A  Registration  Statement  filed  with  the
          Commission on September 30, 2003.

4.2       Indenture,  dated as of May 1, 1992,  between  Albertson's,  Inc.  and
          Morgan  Guaranty Trust Company of New York as Trustee is  incorporated
          herein by reference to Exhibit 4.1 of Form S-3 Registration  Statement
          333-41793 filed with the Commission on December 9, 1997.(1)

4.3       Senior  Indenture dated May 1, 1995,  between  American Stores Company
          and the First National Bank of Chicago,  as Trustee,  is  incorporated
          herein by  reference  to Exhibit  4.1 of Form 10-Q  filed by  American
          Stores Company (Commission File Number 1-5392) on June 12, 1995.(1)

10.1      J. A. and Kathryn Albertson Foundation Inc. Stock Agreement (dated May
          21, 1997) is incorporated  herein by reference to Exhibit 10.1 of Form
          10-Q for the quarter ended May 1, 1997.*

10.1.1    Waiver regarding Alscott Limited Partnership #1 Stock Agreement (dated
          May 21, 1997) is incorporated herein by reference to Exhibit 10.1.1 of
          Form 10-Q for the quarter ended May 1, 1997.*

10.1.2    Waiver  regarding  Kathryn  Albertson Stock  Agreement  (dated May 21,
          1997) is  incorporated  herein by reference to Exhibit  10.1.2 of Form
          10-Q for the quarter ended May 1, 1997.*

10.2      Agreement  between the Company and Gary G. Michael dated  December 22,
          2000 is incorporated  herein by reference to Exhibit 10.2 of Form 10-K
          for the year ended February 1, 2001.*


                                       65
<PAGE>



Number    Description
------    -----------

10.3      Form of Award  of  Deferred  Stock  Units is  incorporated  herein  by
          reference to Exhibit 10.3 of Form 10-K for the year ended  February 1,
          2001.*

10.4      Employment  Agreement  between the Company  and  Lawrence R.  Johnston
          dated April 23, 2001 is  incorporated  herein by  reference to Exhibit
          10.4 of Form 8-K filed on April 26, 2001.*

10.4.1    Amendment to Employment  Agreement between the Company and Lawrence R.
          Johnston  dated July 19, 2001 is  incorporated  herein by reference to
          Exhibit 10.4.1 of Form 10-K for the year ended January 31, 2002.*

10.5      Form of  Beneficiary  Agreement  for Key Executive  Life  Insurance is
          incorporated  herein by reference  to Exhibit  10.5.1 of Form 10-K for
          the year ended January 30, 1986.*

10.6      Executive Deferred Compensation Plan (amended and restated February 1,
          1989) is incorporated herein by reference to Exhibit 10.6 of Form 10-K
          for the year ended February 2, 1989.*

10.6.1    Amendment to Executive  Deferred  Compensation Plan (dated December 4,
          1989) is  incorporated  herein by reference to Exhibit  10.6.1 of Form
          10-Q for the quarter ended November 2, 1989.*

10.6.2    Amendment to Executive Deferred  Compensation Plan (dated December 15,
          1998) is  incorporated  herein by reference to Exhibit  10.6.2 of Form
          10-K for the year ended February 3, 2000.*

10.6.3    Amendment to  Executive  Deferred  Compensation  Plan (dated March 15,
          2001) is  incorporated  herein by reference to Exhibit  10.6.3 of Form
          10-K for the year ended February 1, 2001.*

10.6.4    Amendment to Executive Deferred  Compensation Plan (dated May 1, 2001)
          is incorporated herein by reference to Exhibit 10.6.4 of Form 10-K for
          the year ended January 30, 2003.*

10.7      Senior Operations  Executive Officer Bonus Plan is incorporated herein
          by reference  to Exhibit 10.7 of Form 10-K for the year ended  January
          30, 1997.*

10.8      Form of  Consulting  Agreement  with Special  Advisors to the Board of
          Directors  dated  as of  March  15,  2001 is  incorporated  herein  by
          reference to Exhibit 10.8 of Form 10-K for the year ended  February 1,
          2001.*

10.9      Albertson's,  Inc. Executive  Officers' Annual Incentive  Compensation
          Plan is incorporated herein by reference to Exhibit 10.42 of Form 10-Q
          for the quarter ended May 2, 2002.*

10.10     2000   Deferred   Compensation   Plan  (dated   January  1,  2000)  is
          incorporated  by reference to Exhibit  10.10 of Form 10-K for the year
          ended February 3, 2000.*

10.10.1   First Amendment to the 2000 Deferred  Compensation Plan (dated May 25,
          2001) is  incorporated  herein by reference to Exhibit 10.10.1 of Form
          10-K for the year ended January 30, 2003.*

10.10.2   Second  Amendment to the 2000 Deferred  Compensation  Plan (dated July
          18, 2001) is  incorporated  herein by reference to Exhibit  10.10.2 of
          Form 10-K for the year ended January 30, 2003.*


                                       66
<PAGE>



Number    Description
------    -----------
10.10.3   Third Amendment to the 2000 Deferred Compensation Plan (dated December
          31, 2001) is  incorporated  herein by reference to Exhibit  10.10.3 of
          Form 10-K for the year ended January 30, 2003.*

10.10.4   Fourth  Amendment to Deferred  Compensation  Plan (dated  December 22,
          2003).*

10.11     Employment  Agreement  between the Company and John R. Sims  effective
          April 3, 2002 is  incorporated  by reference to Exhibit  10.11 of Form
          10-K for the year ended January 31, 2002.*

10.12     [Intentionally left blank]

10.13     Executive  Pension Makeup Plan (amended and restated February 1, 1989)
          is incorporated  herein by reference to Exhibit 10.13 of Form 10-K for
          the year ended February 2, 1989.*

10.13.1   First Amendment to Executive  Pension Makeup Plan (dated June 8, 1989)
          is  incorporated  herein by reference to Exhibit  10.13.1 of Form 10-Q
          for the quarter ended May 4, 1989.*

10.13.2   Second  Amendment to Executive  Pension Makeup Plan (dated January 12,
          1990) is  incorporated  herein by reference to Exhibit 10.13.2 of Form
          10-K for the year ended February 1, 1990.*

10.13.3   Third  Amendment to Executive  Pension  Makeup Plan (dated January 31,
          1990) is  incorporated  herein by reference to Exhibit 10.13.3 of Form
          10-Q for the quarter ended August 2, 1990.*

10.13.4   Fourth Amendment to Executive  Pension Makeup Plan (effective  January
          1, 1995) is  incorporated  herein by reference  to Exhibit  10.13.4 of
          Form 10-K for the year ended February 2, 1995.*

10.13.5   Amendment to Executive  Pension Makeup Plan (retroactive to January 1,
          1990) is  incorporated  herein by reference to Exhibit 10.13.5 of Form
          10-K for the year ended February 1, 1996.*

10.13.6   Amendment to Executive  Pension Makeup Plan (retroactive to October 1,
          1999) is  incorporated  herein by reference to Exhibit 10.13.6 of Form
          10-K for the year ended February 3, 2000.*

10.13.7   Amendment  to  Executive  Pension  Makeup Plan (dated June 1, 2001) is
          incorporated  herein by reference to Exhibit  10.13.7 of Form 10-K for
          the year ended January 30, 2003.*

10.14     Executive ASRE Makeup Plan (dated  September 26, 1999) is incorporated
          herein by reference  to Exhibit  10.14 of Form 10-K for the year ended
          February 3, 2000.*

10.14.1   First Amendment to the Executive ASRE Makeup Plan (dated May 25, 2001)
          is  incorporated  herein by reference to Exhibit  10.14.1 of Form 10-K
          for the year ended January 30, 2003.*

10.14.2   Second Amendment to the Executive ASRE Makeup Plan (dated December 31,
          2001) is  incorporated  herein by reference to Exhibit 10.14.2 of Form
          10-K for the year ended January 30, 2003.*

10.15     Senior  Executive  Deferred  Compensation  Plan  (amended and restated
          February 1, 1989) is incorporated herein by reference to Exhibit 10.15
          of Form 10-K for the year ended February 2, 1989.*


                                       67
<PAGE>



Number    Description
------    -----------

10.15.1   Amendment  to  Senior  Executive  Deferred  Compensation  Plan  (dated
          December  4,  1989) is  incorporated  herein by  reference  to Exhibit
          10.15.1 of Form 10-Q for quarter ended November 2, 1989.*

10.15.2   Amendment  to  Senior  Executive  Deferred  Compensation  Plan  (dated
          December  15,  1998) is  incorporated  herein by  reference to Exhibit
          10.7.1 of Form 10-K for the year ended February 3, 2000.*

10.15.3   Amendment to Senior Executive Deferred Compensation Plan (dated May 1,
          2001) is  incorporated  herein by reference to Exhibit 10.15.3 of Form
          10-K for the year ended January 30, 2003.*

10.16     1986  Nonqualified  Stock  Option  Plan  (amended  March  4,  1991) is
          incorporated herein by reference to Exhibit 10.16 of Form 10-K for the
          year ended  January 31, 1991.  Exhibit  10.16  expired by its terms in
          1996.  Notwithstanding  such  expiration,  certain  agreements for the
          options granted under these option plans remain outstanding.*

10.17     Form of 1986  Nonqualified  Stock Option Plan Stock  Option  Agreement
          (amended  November  30, 1987) is  incorporated  herein by reference to
          Exhibit 10.17 of Form 10-Q for the quarter ended October 29, 1987.*

10.18     Executive   Pension   Makeup  Trust   (dated   February  1,  1989)  is
          incorporated herein by reference to Exhibit 10.18 of Form 10-K for the
          year ended February 2, 1989.*

10.18.1   Amendment to Executive  Pension  Makeup Trust (dated July 24, 1998) is
          incorporated  herein by reference to Exhibit  10.18.1 of Form 10-K for
          the year ended February 3, 2000.*

10.18.2   Amendment to Executive  Pension Makeup Trust (dated  December 1, 1998)
          is  incorporated  herein by reference to Exhibit  10.18.1 of Form 10-Q
          for quarter ended October 29, 1998.*

10.18.3   Amendment to Executive  Pension Makeup Trust (dated  December 1, 1999)
          is  incorporated  herein by reference to Exhibit  10.18.3 of Form 10-K
          for year ended February 3, 2000.*

10.18.4   Amendment to Executive  Pension Makeup Trust (dated March 31, 2000) is
          incorporated  herein by reference to Exhibit  10.18.4 of Form 10-K for
          year ended February 1, 2001.*

10.19     Executive  Deferred  Compensation  Trust  (dated  February 1, 1989) is
          incorporated  herein by  reference  to Exhibit  10.19 of Form 10-K for
          year ended February 2, 1989.*

10.19.1   Amendment to  Executive  Deferred  Compensation  Trust (dated July 24,
          1998) is  incorporated  herein by reference to Exhibit 10.19.1 of Form
          10-K for year ended February 3, 2000.*

10.19.2   Amendment to Executive Deferred  Compensation Trust (dated December 1,
          1998) is  incorporated  herein by reference to Exhibit 10.19.1 of Form
          10-Q for quarter ended October 29, 1998.*

10.19.3   Amendment to Executive Deferred  Compensation Trust (dated December 1,
          1999) is  incorporated  herein by reference to Exhibit 10.19.3 of Form
          10-K for year ended February 3, 2000.*

10.19.4   Amendment to Executive  Deferred  Compensation  Trust (dated March 31,
          2000) is  incorporated  herein by reference to Exhibit 10.19.4 of Form
          10-K for year ended February 1, 2001.*


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<PAGE>



Number    Description
------    -----------

10.20     1990 Deferred Compensation Plan is incorporated herein by reference to
          Exhibit 10.20 of Form 10-K for year ended January 31, 1991.*

10.20.1   Amendment to 1990 Deferred Compensation Plan (dated April 12, 1994) is
          incorporated  herein by reference to Exhibit  10.20.1 of Form 10-Q for
          the quarter ended August 4, 1994.*

10.20.2   Amendment to 1990 Deferred  Compensation Plan (dated November 5, 1997)
          is  incorporated  herein by reference to Exhibit  10.20.2 of Form 10-K
          for the year ended January 29, 1998.*

10.20.3   Amendment to 1990 Deferred  Compensation Plan (dated November 1, 1998)
          is  incorporated  herein by reference to Exhibit  10.20.3 of Form 10-Q
          for the quarter ended October 29, 1998.*

10.20.4   Termination  of 1990 Deferred  Compensation  Plan (dated  December 31,
          1999) is  incorporated  herein by reference to Exhibit 10.20.4 of Form
          10-K for the year ended January 30, 2003.*

10.20.5   Amendment to 1990  Deferred  Compensation  Plan (dated May 1, 2001) is
          incorporated  herein by reference to Exhibit  10.20.5 of Form 10-K for
          the year ended January 30, 2003.*

10.20.6   Amendment to 1990 Deferred  Compensation Plan (dated December 31, 2001
          to be effective  May 1, 2001) is  incorporated  herein by reference to
          Exhibit 10.20.6 of Form 10-K for the year ended January 30, 2003.*

10.21     Non-Employee  Directors'  Deferred  Compensation  Plan is incorporated
          herein by reference  to Exhibit  10.21 of Form 10-K for the year ended
          January 31, 1991.*

10.21.1   Amendment to Non-Employee Directors' Deferred Compensation Plan (dated
          December  15,  1998) is  incorporated  herein by  reference to Exhibit
          10.21.1 of Form 10-K for year ended February 3, 2000.*

10.21.2   Amendment to Non-Employee Directors' Deferred Compensation Plan (dated
          March 15, 2001) is incorporated herein by reference to Exhibit 10.21.2
          of Form 10-K for the year ended February 1, 2001.*

10.21.3   Amendment to Non-Employee Directors' Deferred Compensation Plan (dated
          May 1, 2001) is incorporated herein by reference to Exhibit 10.21.3 of
          Form 10-K for the year ended January 30, 2003.*

10.21.4   Amendment to Non-Employee Directors' Deferred Compensation Plan (dated
          December 22, 2003).*

10.22     1990  Deferred   Compensation  Trust  (dated  November  20,  1990)  is
          incorporated  herein by  reference  to Exhibit  10.22 of Form 10-K for
          year ended January 31, 1991.*

10.22.1   Amendment to 1990 Deferred Compensation Trust (dated July 24, 1998) is
          incorporated  herein by reference to Exhibit  10.22.1 of Form 10-K for
          year ended February 3, 2000.*

10.22.2   Amendment to 1990 Deferred Compensation Trust (dated December 1, 1998)
          is  incorporated  herein by reference to Exhibit  10.22.1 of Form 10-Q
          for quarter ended October 29, 1998.*

10.22.3   Amendment to 1990 Deferred Compensation Trust (dated December 1, 1999)
          is  incorporated  herein by reference to Exhibit  10.22.3 of Form 10-K
          for year ended February 3, 2000.*


                                       69
<PAGE>



Number    Description
------    ----------

10.22.4   Amendment to 1990 Deferred  Compensation  Trust (dated March 31, 2000)
          is  incorporated  herein by reference to Exhibit  10.22.4 of Form 10-K
          for year ended February 1, 2001.*

10.23     2000  Deferred   Compensation   Trust  (dated   January  1,  2000)  is
          incorporated  herein by  reference  to Exhibit  10.23 of Form 10-K for
          year ended February 3, 2000.*

10.23.1   Amendment  to the 2000  Deferred  Compensation  Trust (dated March 31,
          2000) is  incorporated  herein by reference to Exhibit 10.23.1 of Form
          10-K for year ended February 1, 2001.*

10.24     1995  Stock-Based  Incentive Plan (dated May 26, 1995) is incorporated
          herein by  reference  to  Exhibit  10.24 of Form 10-Q for the  quarter
          ended May 4, 1995.*

10.24.1   Form of 1995 Stock-Based  Incentive Plan Stock Option Agreement (dated
          December  4,  1995) is  incorporated  herein by  reference  to Exhibit
          10.24.1 of Form 10-K for the year ended February 1, 1996.*

10.25     1995 Stock Option Plan for Non-Employee Directors (dated May 26, 1995)
          is incorporated  herein by reference to Exhibit 10.25 of Form 10-Q for
          the quarter ended May 4, 1995.*

10.25.1   Form of 1995 Stock Option Plan for  Non-Employee  Directors  Agreement
          (dated May 30,  1995) is  incorporated  herein by reference to Exhibit
          10.25.1 of Form 10-Q for the quarter ended May 4, 1995.*

10.25.2   Amendment to 1995 Stock Option Plan for Non-Employee  Directors (dated
          March 15, 2001) is incorporated herein by reference to Exhibit 10.25.2
          of Form 10-K for the year ended February 1, 2001.*

10.26.1   Amendment  to Amended and Restated  1995  Stock-Based  Incentive  Plan
          (dated March 15, 2001) is incorporated  herein by reference to Exhibit
          10.26.1 of Form 10-K for the year ended February 1, 2001.*

10.27     Termination  and  Consulting  Agreement by and among  American  Stores
          Company,  Albertson's,  Inc. and Victor L. Lund is incorporated herein
          by reference to Exhibit  10.27 of Form 10-K for the year ended January
          28, 1999.*

10.28     Credit  Agreement  (5-year)  (dated  March 22,  2000) is  incorporated
          herein by reference  to Exhibit  10.28 of Form 10-K for the year ended
          February 3, 2000.

10.28.1   Amendment  to Credit  Agreement  (5-year)  (dated  March 15,  2001) is
          incorporated by reference to Exhibit 10.28.1 of Form 10-K for the year
          ended February 1, 2001.

10.29     Amended and Restated Credit Agreement (364-day) (dated March 7, 2003).

10.29.1   First  Amendment to Amended and Restated  Credit  Agreement  (364-day)
          (dated February 19, 2004).

10.30     American Stores Company  Supplemental  Executive  Retirement Plan 1998
          Restatement is incorporated herein by reference to Exhibit 4.1 of Form
          S-8 filed by American Stores Company  (Commission  File Number 1-5392)
          on July 13, 1998.*

10.30.1   Amendment to American Stores Company Supplemental Executive Retirement
          Plan 1998 Restatement, dated as of September 15, 1998, is incorporated
          herein by  reference  to Exhibit  10.4 of Form 10-Q filed by  American
          Stores Company (Commission File Number 1-5392) on December 11, 1998.*


                                       70
<PAGE>



Number    Description
------    -----------

10.31     American  Stores  Company  1997 Stock  Option and Stock  Award Plan is
          incorporated  herein  by  reference  to  Exhibit  B of the 1997  Proxy
          Statement  filed by American  Stores Company  (Commission  File Number
          1-5392) on May 2, 1997.*

10.31.1   Amendment to American Stores Company 1997 Stock Option and Stock Award
          Plan, dated as of October 8, 1998, is incorporated herein by reference
          to  Exhibit  10.1  of Form  10-Q  filed  by  American  Stores  Company
          (Commission File Number 1-5392) on December 11, 1998.*

10.31.2   Amendment to American Stores Company 1997 Stock Plan for  Non-Employee
          Directors  (dated  March 15,  2001) is  incorporated  by  reference to
          Exhibit 10.31.2 of Form 10-K for the year ended February 1, 2001.*

10.32     American Stores Company 1997A Stock Option and Stock Award Plan, dated
          as of March 27, 1997, is  incorporated  herein by reference to Exhibit
          4.11 of the S-8 Registration  Statement  (Registration  No. 333-82157)
          filed by Albertson's, Inc. on July 2, 1999.*

10.33     American Stores Company 1997 Stock Plan for Non-Employee  Directors is
          incorporated  herein  by  reference  to  Exhibit  C of the 1997  Proxy
          Statement  filed by American  Stores Company  (Commission  File Number
          1-5392) on May 2, 1997.*

10.34     American  Stores  Company  Amended and Restated  1989 Stock Option and
          Stock Award Plan is  incorporated  herein by reference to Exhibit 4.13
          of the S-8 Registration  Statement  (Registration No. 333-82157) filed
          by Albertson's, Inc. on July 2, 1999.*

10.35     American  Stores  Company  Amended and Restated  1985 Stock Option and
          Stock Award Plan is  incorporated  herein by reference to Exhibit 4.14
          of the S-8 Registration  Statement  (Registration No. 333-82157) filed
          by Albertson's, Inc. on July 2, 1999.*

10.36.2   Letter Agreement between the Company and Peter L. Lynch dated July 24,
          2003 is  incorporated  herein by reference to Exhibit  10.36.2 of Form
          10-Q for the quarter ended July 31, 2003.*

10.36     Employment  Agreement  between  the  Company  and Peter L. Lynch dated
          January 26, 2001 is incorporated  herein by reference to Exhibit 10.36
          to Form 10-Q for the quarter ended August 2, 2001.*

10.36.1   Amendment  to  Employment  Agreement  between the Company and Peter L.
          Lynch dated  April 23, 2001 is  incorporated  herein by  reference  to
          Exhibit 10.36.1 to Form 10-Q for the quarter ended August 2, 2001.*

10.37     Agreement  between  the Company and Peter L. Lynch dated June 18, 1999
          is incorporated  herein by reference to Exhibit 10.37 to Form 10-Q for
          the quarter ended August 2, 2001.*

10.38     Albertson's  Voluntary Separation Plan for officers effective July 18,
          2001 is incorporated herein by reference to Exhibit 10.38 to Form 10-Q
          for the quarter ended August 2, 2001.*

10.39     Albertson's  Severance  Plan for Officers  effective  July 18, 2001 is
          incorporated herein by reference to Exhibit 10.39 to Form 10-Q for the
          quarter ended August 2, 2001.*

10.40     Employment Agreement between the Company and Felicia D. Thornton dated
          August 6, 2001 is incorporated herein by reference to Exhibit 10.40 to
          Form 10-Q for the quarter ended August 2, 2001.*


                                       71
<PAGE>

Number    Description
------    -----------

10.41     Albertson's  Amended and Restated 1995  Stock-Based  Incentive Plan is
          incorporated herein by reference to Exhibit 10.41 to Form 10-Q for the
          quarter ended November 1, 2001.*

10.41.1   Form of 1995 Amended and  Restated  Stock-Based  Incentive  Plan Stock
          Option  Agreement  is  incorporated  herein by  reference  to  Exhibit
          10.41.1 to Form 10-Q for the quarter ended November 1, 2001.*

10.42     Albertsons  Severance Plan for Officers  effective  October 1, 2002 is
          incorporated  by  reference  to  Exhibit  10.42  of Form  10-Q for the
          quarter ended October 31, 2002.*

10.43     Albertsons Change of Control  Severance  Agreement for Chief Operating
          Officer and Executive  Vice  President  effective  November 1, 2002 is
          incorporated  by  reference  to  Exhibit  10.43  of Form  10-Q for the
          quarter ended October 31, 2002.*

10.44     Albertsons  Change of Control  Severance  Agreement  for  Senior  Vice
          Presidents  and Group Vice  Presidents  effective  November 1, 2002 is
          incorporated  by  reference  to  Exhibit  10.44  of Form  10-Q for the
          quarter ended October 31, 2002.*

10.45     Albertsons Change of Control  Severance  Agreement for Vice Presidents
          effective  November 1, 2002 is  incorporated  by  reference to Exhibit
          10.45 of Form 10-Q for the quarter ended October 31, 2002.*

10.46     Albertsons  Amended and Restated 1995  Stock-Based  Incentive  Plan as
          amended  effective  December 9, 2002 is  incorporated  by reference to
          Exhibit 10.46 of Form 10-Q for the quarter ended October 31, 2002.*

10.46.1   Form of Award of Stock Option is  incorporated by reference to Exhibit
          10.46.1 of Form 10-Q for the quarter ended October 31, 2002.*

10.46.2   Form of Award of Deferred Stock Units is  incorporated by reference to
          Exhibit 10.46.2 of Form 10-Q for the quarter ended October 31, 2002.*

10.47     Long-term  Incentive  Plan  (effective  as of  February  1,  2003)  is
          incorporated  by  reference  to  Exhibit  10.47  of Form  10-Q for the
          quarter ended May 1, 2003.*

10.48     Form of Director  Indemnification  Agreement is incorporated herein by
          reference to Exhibit  10.47 of Form 10-Q for the quarter ended October
          30, 2003.*

10.49     Credit Agreement (364-day) (dated February 13, 2004).

21        Subsidiaries of the Registrant

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.


                                       72
<PAGE>

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

32        Certification  pursuant  to Section 906 of the  Sarbanes-Oxley  Act of
          2002.

*         Identifies  management contracts or compensatory plans or arrangements
          required to be filed as an exhibit hereto.

(1)       In reliance upon Item  601(b)(4)(iii)(A)  of Regulation  S-K,  various
          other instruments  defining the rights of holders of long-term debt of
          the  Registrant  and its  subsidiaries  are not being filed  herewith,
          because  the total  amount of  securities  authorized  under each such
          instrument  does not exceed 10% of the total assets of the  Registrant
          and its subsidiaries on a consolidated  basis.  The Registrant  hereby
          agrees to furnish a copy of any such instrument to the Commission upon
          request.



                                       73