Retailers

Albertsons ‘Strategy Is Working,’ CEO Vivek Sankaran Says

Company cites share growth reviewing Q3 results
Albertsons storefront
Photograph courtesy of Albertsons Cos.

Robust financial results for the fiscal third quarter, including identical sales growth of 12.3% powered by a 225% increase in digital sales, validates the strategic priorities at Albertsons Cos. and leaves it positioned to deliver over the long term, CEO Vivek Sankaran said.

“It is clear that our strategy is working, said Sankaran, attributing the Boise, Idaho-based company’s success, at least in part, to a focus on its customers, its associates and the communities it serves.

“During the quarter, we continued to gain significant market share within both food and MULO (multioutlet) in both dollars and units, and experienced strong growth across geographies regardless of the level of COVID restrictions in place,” Sankaran said in a conference call discussing results, according to a Sentieo transcript. “This gives us confidence in the sustainability of our competitiveness in the future.”

Albertsons’ growth trajectory also featured scores of new customers, with more than 6 million new households shopping with the grocer this quarter—customers Sankaran believes it can retain.

“Those who shopped with us last quarter have returned this quarter at a higher rate than in Q2,” he added. And while they are making fewer trips to the store, basket size is up, as is the strength of Albertsons’ loyalty program.

“Our loyalty program continues to show strong growth,” Sankaran reported. “We now have 24.3 million registered users, an increase of 23.5% year over year, and these customers are spending 2.5 times more on average than nonregistered customers. In addition, actively engaged households in our loyalty programs have increased 17.5% year over year and encompass nearly 40% of transactions and 50% of sales.” These customers spend more than four times that of nonactive customers, he added.

Albertsons further attributes growth to its business reinvestment in “high-return projects.” It has allocated an incremental $200 million of store-related capital to accelerate such projects, including remodels, the rollout of its module program focused on customer checkout and new merchandising offerings, as well as replacement of unproductive self-serve features such as salad bars.

Sankaran also said the company’s strong performance is due to its commitment to four strategic prioritiesrunning great stores that emphasize fresh and store brands; an accelerated e-commerce agenda; driving productivity and reinvesting in growth; and talent and culture.

Despite surging e-commerce demand to the tune of 225% digital growth, Albertsons said its main focus is the in-store experience. “Our first priority is in-store excellence,” Sankaran said. “Our stores remain the core of our business, and we are proud of our convenient locations and the broad assortment of products we offer to create a one-stop shopping experience for our customers.”

Sankaran believes Albertsons’ Own Brands offerings have also been “a key differentiator throughout the pandemic and will continue to be an advantage for us going forward.” Albertsons’ private label portfolio of more than 12,000 items reached $14 billion in sales across nine primary brands, four of which have over $1 billion in sales.

On the investor call, Sankaran reiterated Albertsons’ commitment to fresh and its expanding portfolio of meal solutions, identifying fresh seafood, meat, chicken and floral as sales drivers as consumers spend more time at home.

“We believe that purchases of fresh product drives trips as our loyal customers often stock up on shelf-stable items in one trip but come back frequently for fresh product,” said Sankaran, adding that in the third quarter, Albertsons’ most loyal shoppers increased their average spend on fresh 200 basis points compared to the average in-store total spend the prior year. These shoppers also visit stores more frequently, with nearly three out of four trips including fresh.

Deep Into Digital

Though Albertsons said it remains focused on the in-store shopping experience, digital continues to be a key growth driver for the company, which marked its third straight quarter of more than 200% sales growth, up 225% in the third quarter. The company is so confident in ongoing digital growth, it plans to invest more than $300 million to accelerate services and offerings.

Its Drive Up & Go program alone grew over 800% as the company launched 231 new Drive Up & Go locations during the quarter. The service is now available in 1,181 stores, and Albertsons aims to have more than 1,400 locations by the end of this fiscal year, as well as more than 1,800 locations at the end of fiscal year 2021.

“We firmly believe some consumer behaviors adopted during the pandemic will continue post pandemic,” said Sankaran. “And we believe increased use of digital offerings will be one of the key behaviors that sticks. To capitalize on this trend, we are investing over $300 million in CapEx and OpEx to accelerate our offerings in this area during fiscal year 2020 to launch new capabilities that build on our strengths as well as drive scale and profitability. “

Sankaran pointed to 2020 initiatives already in its digital stable, including zero-touch payment capabilities at all of its stores, which allowed in-store customers to enter their loyalty credentials for discounts and rewards and pay for their groceries from their phone without touching the PIN pad. Albertsons also set up the ability to accept SNAP for online payment on Drive Up & Go orders in 199 stores, a service it plans to expand in early fiscal 2021.

“From a customer experience and convenience perspective, we have made noticeable improvements to our app, which have resulted in increased usage, and [we] are piloting a number of walk up and go options in select stores in Chicago and Northern California, involving walk-up counters, lockers and stand-alone kiosks in our parking lots,” said Sankaran.

Diversity, Inclusion and Safety

As part of Albertsons’ strategic focus on strengthening its talent, culture and the communities it serves, Sankaran said the company is “guided by diversity and inclusion throughout our operations and recruiting efforts and have continued to add impressive talent to our team.”

During the pandemic, Albertsons has also continued to put its customers and associates first when it comes to safety, added Sankaran, pointing to the company’s implementation of contactless temperature and health screening for associates across all its facilities, as well as its partnership with the Department of Health and Human Services to administer free COVID-19 vaccines in its communities.

“In addition, we continue to value the contribution of our associates on the front lines and awarded another $45 million in discretionary appreciation bonuses during the quarter,” said Sankaran.

 

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