Albertsons Inc. (ABS), the No. 2 U.S. grocer, on Friday put itself up for sale as it grapples with intense competition from Wal-Mart Stores Inc. (WMT) and other chains, sending its stock up as much as 25 percent to a 14-month high.

The retailer, which operates stores under banners including Albertsons, Jewel-Osco (search) and Shaw's, said it hired Goldman Sachs & Co. and Blackstone Group to explore strategic options including a possible sale, but added that there could be no assurances that any deal would occur.

The news also sent shares of Kroger Co. (KR) and Safeway Inc. (SWY) higher amid hopes that they would reap the benefits of easing competition or be able to buy some Albertsons stores at a good price, said Robert Campagnino, an analyst with Prudential Equity Group.

"Albertsons was our least favorite name among the conventional grocers, and we see this decision by the company as an admission that the business isn't performing particularly well," Campagnino wrote in a note to clients.

He said it was unlikely that Albertsons will find a buyer for its entire operations, and the company could be split up into pieces with private equity firms buying up certain assets rather than the whole.

Albertsons, based in Boise, Idaho, said it would not disclose developments in its strategic review until directors approved a deal.

Debt rating agency Standard & Poor's said it may cut the retailer's rating to "junk" status.

"These strategic alternatives could potentially weaken bondholder protection measures," S&P credit analyst Mary Lou Burde wrote.

Investors sold Albertsons bonds on Friday, and the spreads on the company's 7.5 percent notes due in 2011 widened by 124 basis points to 256 basis points more than Treasuries, according to MarketAxess.

U.S. grocers have been hard hit by Wal-Mart's rapid expansion of supercenters, which include a full line of groceries alongside discounted general merchandise.

Grocery chain Winn-Dixie Stores Inc. (search) filed for bankruptcy protection in February, partly because of stiff competition from Wal-Mart.

Traditional grocers have responded by cutting prices and trying to stock more upscale merchandise such as organic food, in hopes of winning back customers. Wal-Mart still ranks as the largest seller of groceries in the United States.

Albertsons said in June that quarterly profit nearly tripled as sales rebounded from last year's California strike, but analysts have said the retailer isn't doing enough to address competition in the grocery sector.

The retailer operates about 2,500 stores in 37 U.S. states, but it has pulled out of some unprofitable markets including New Orleans and Omaha in recent years.

Shares of Albertsons were up $2.47 at $23.20 in NYSE trading. They traded as high as $25.95 earlier in the session, their highest mark since July 2004. Kroger's stock was up 12 cents at $19.93, while Safeway gained 53 cents to $24.23.