Retailers

Albertsons Posts Monster Q1

Sales, comps and margins soar in COVID-aided quarter; declines giving annual outlook
Photograph courtesy of Albertsons Cos.

Albertsons Cos. realized abundant sales and profits during its fiscal first quarter, leveraging heightened consumer demand due to COVID-19-related changes in consumer shopping patterns.

The Boise, Idaho-based retailer said sales for the 16-week fiscal first quarter—which began just as shoppers began hoarding groceries in anticipation of the pandemic on Feb. 29 and ended June 20 just as areas of the country were slowly reopening, including competing channels such as restaurants—soared by 21.4% to $22.8 billion, driven by a same-store sales lift of 26.5%. Same-store sales also benefited from a 276% increase in digital sales.

The rapid volumes allowed Albertsons to reduce losses from shrink, and a subsequent pullback in promotions, reflecting strains on the supply chain, helped profits to soar. Gross margins as a percent of sales in the period increased to 29.8%, vs. 28% in last year’s first quarter. Excluding fuel, margins were up 80 basis points.

The company also saw expenses as a percent of sales dip due to the higher sales volumes by a full percent to 25.4% of sales, despite higher costs incurred during the quarter. Albertsons said COVID-19-related investments were approximately $615 million, including a total of $275 million in “appreciation pay” for workers and $53 million in hunger-relief efforts.

Albertsons accomplished all this while successfully getting its stock listed on the New York Stock Exchange for the first time in nearly 15 years, executing an IPO that facilitated the exit of the controlling Cerberus consortium and selling a portion of itself to Apollo Global Management through a private stock placement, which generating $1.7 billion for the company.

“I am inspired by the many ways my colleagues continue to step up to serve our customers and help our communities around the country during this time of need,” Vivek Sankaran, president and CEO, said in a release. “Their hard work and dedication have also allowed us to successfully navigate this extraordinary environment, and we have accelerated our digital and e-commerce strategy to adapt to market conditions. We generated strong financial performance in the first quarter, including robust cash flow and enhanced liquidity, which support our continued investment to benefit our associates, customers, communities and stockholders.”

Net cash provided by operating activities was $2.1 billion during the first quarter, compared to $802.7 million during the first quarter of fiscal 2019. The increase in cash flow was primarily due to improvements in operating performance and changes in working capital primarily related to inventory and accounts payable driven by the increase in sales volume during the first quarter of fiscal 2020.

The company during the quarter spent approximately $402.3 million in capital expenditures, which included investments in strategic technology and accelerated investments in e-commerce, along with 46 store remodels.

Albertsons acknowledged significant increases in product demand and overall basket size in stores and in its e-commerce since the beginning of the quarter but declined to project the impact over the course of the fiscal year. Partial results previously disclosed as part of its IPO filings indicate sales have tempered in recent weeks, as comps through 12 weeks of the first quarter were running 30%.

“The ongoing COVID-19 pandemic has dramatically changed the landscape of food-at-home consumption, and the company continues to prioritize the health and safety of our associates, customers and communities,” it said.

As of June 20, Albertsons operated 2,252 retail food and drug stores, with 1,726 pharmacies, 402 associated fuel centers, 23 dedicated distribution centers and 20 manufacturing facilities. It has stores in 34 states and the District of Columbia under 20 banners, including Albertsons, Safeway, Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen and Carrs.

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