Retailers

Pandemic Drives Strong Sales for Albertsons; CEO Lauds Response

Vivek Sankaran cites 'safety, supply and speed' as keys to capturing opportunity

Identical-store sales at Albertsons Cos. soared by 47% in the first weeks of the COVID-19 pandemic and are up by 34% for the eight weeks through April 25.

The Boise, Idaho-based retailer provided those figures—similar to those previously relayed by supermarket rivals such as The Kroger Co. and Ahold Delhaize—while reviewing financial results for its fourth quarter and fiscal year.

The most recent financial period ended Feb. 29, shortly before pronounced panic buying, restaurant closures and shelter-in-place orders imposed as a defense against the coronavirus brought an explosion in both supermarkets and online, Albertsons officials said. For the quarter, Albertsons’ same-store sales were up a modest 1.8%.

“We are pleased that our momentum continued as we closed fiscal 2019, with improved performance on the top and bottom line. However, the world has changed since then, and we are heavily focused on supporting our associates, our customers and the communities we serve as we respond to the increased demand resulting from the COVID-19 pandemic,” said Vivek Sankaran, president and CEO of Albertsons, in a statement. “We are so proud of the efforts of our store, distribution and manufacturing teams, whose work has been heroic in the face of this crisis, and we thank them for everything they continue to do. Both our stores and our online business are seeing significantly increased demand as consumers shift to more food at home.”

In a conference call, Sankaran said Albertsons was making the most of the crisis and its challenges, overcoming early bouts of shopped-down stores and moving to shore up resources to meet additional demand for e-commerce options by focusing on “safety, supply and speed.” He highlighted efforts, including taking fresh inventory from nontraditional suppliers in the restaurant field; leveraging its in-store meat departments; adjustments to its loyalty and rewards programs; and stepped-up hiring, including partnerships with 35 counterparts in the service industry to temporarily employ their furloughed workers, helping the company fulfill additional e-commerce orders in April as opposed to March.

Sankaran said e-commerce sales were up by 109% year over year in March and by 347% in April, or 243% for the first eight weeks of its first quarter. The increase was associated with the addition of about 55,000 new workers, many now supporting picking, packing and delivery. Sankaran said he anticipated that some of the new hires would return to their employers when they restart, but he said Albertsons “would continuing hiring until we have met demand.”

Sankaran stressed that much of the e-commerce sales growth wasn’t just a shift in how its own customers shopped but incremental new business as well. “While we’re adding the cost, which is primarily labor, we’re also getting the revenues to support that and cover that,” he said.

Sankaran cited similar ingenuity in addressing operational and supply concerns. In March, it solved a shortage of hand sanitizer for employees and stores by acquiring drums through a contact of one of its executives and then bottling it for distribution to stores in its own-brand beverage bottling plant.

For the 13-week fourth quarter, Albertsons reported sales of $15.4 billion, a 10% increase or 2.1% when adjust for effects of the 12-week 2018 fourth quarter. Gross margins dipped by 40 basis points to 28.6% of sales as a result of incremental rent expense from sale-leasebacks and lower fuel margins. Net income was down 50% on debt-extinguishing costs and higher taxes. EBITDA of $756 million was slightly above internal expectations.

Sankaran said the company would be “watching the markets” for the right time to proceed with a planned public stock offering. The company publicly filed for an IPO just days before the pandemic was declared. Sources say volatility in the stock market make an immediate filing unlikely, although strong business results since the outset could increase its chances to successfully launch.

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