Albertsons Q1: ecommerce sales storm ahead

Date : 17 July 2018

We review Albertsons’ first quarter performance, including a rapid increase in ecommerce sales following the acquisition of meal kits company, Plated.

Anticipates identical store sales of 1.5-2.0% for the full year

Albertsons’ first quarter sales increased by 1.0% to $18.7bn with identical store sales up 0.2%. Adjusted EBITDA increased by 5.7% to $44.1 m. The retailer anticipates strengthening sales growth through its fiscal year, with identical store sales forecast to be between 1.5% and 2.0% for the full year.

Plated acquisition driving ecommerce sales

Ecommerce sales increased by 108%, reflecting its acquisition of meal kit company, Plated. This deal, completed last September, has enabled the retailer to quickly enter this high growth area. Its stores have provided a platform to significantly expand the distribution of Plated's ranges and better meet shoppers' growing demand for convenient meal solutions. Following a 40-store test launched earlier this year, the ranges are being rolled-out to hundreds of stores this year.

Source: IGD Research

Extending delivery and store pickup services

The retailer is also seeing momentum with its core grocery ecommerce services. It is rolling-out same day delivery in partnership with Instacart, with the service expected to be available in around 2,000 stores later this summer. It is also ramping up the roll-out of its Drive Up & Go store pickup service. This is expected to be available in 500 stores by the end of the year.

Private label penetration up to 24%

Private label development continues to be a key focus for the business. During the quarter, private label penetration grew by 56 basis points to represent 24.0% of sales. This performance was underpinned by the launch of over 400 new items. Recently, it announced plans to launch a new online marketplace for natural and organic products, including its O Organics and Open Nature ranges.

Focus shifting to Rite Aid acquisition

This solid set of results comes as the business focuses on its impending merger with Rite Aid. This mega-deal is designed to create a differentiated leader in food, health and wellness. This will be a transformational deal for the business, adding over 2,500 drugstores to the portfolio and significantly expanding its geographic presence.

The enlarged business is expected to generate sales of around $83bn annually, from a network of almost 4,900 stores, including 4,345 pharmacies. The business expects to realise $375m in annual run-rate cost synergies within three years and have the opportunity to generate $3.6 billion in annual sales synergies to drive future growth. The merger is expected to close early in the second half.

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