With Albertsons preparing to go public, we look at the recent effects of COVID-19 and how these have impacted the business.
The timing is right
Albertsons has been preparing to go public for some time and filed its plans for IPO with federal regulators back in March. It has now launched these plans and will sell 65.8 million shares on the New York Stock Exchange, although the exact date for this offering has not yet been announced. Albertsons estimates that shares will begin trading at $18-20 per share, raising between $1.2-1.3bn when it goes public.
Whilst COVID-19 has had a severe impact on the US population and market, Albertsons has remained successful throughout the pandemic and is in a strong position to thrive going forward. It has increased its market share across the majority of its markets and believes its response to the pandemic, along with the strength of its supply chain, will lead to its competitive position being strengthened further. Same store sales were up 34% year on year for the period between March 1st and April 25th, demonstrating strong growth during turbulent times.
Factors that have set it up to win
There are a number of key strengths which have contributed to Albertsons success during the pandemic and made it a good time to go public:
1. Strong ecommerce platform
Its ecommerce business was already performing well, with a number of investments having been made in this area. With the pandemic causing a surge in demand for online services, Albertsons was able to accelerate the roll out of its Drive Up & Go curbside pickup service, now available in around 650 locations. Home delivery is also available in more than 2,000 locations and it has partnered with Instacart, GrubHub and Uber Eats for Rush delivery, along with delivery of prepared and ready to eat foods.
Source: IGD Research
2. Grocery in demand
Across the grocery market, retailers have benefitted from increased demand during the pandemic. Shoppers have been spending more time at home, and this coupled with the temporary closure of restaurants, cafes etc has led to an increased demand for groceries. Albertsons has a number of prime locations, with many stores located in first or main locations. The convenience of this has positioned it well, with shoppers looking for stores which are local and can provide everything they need in one location. This has helped Albertsons to increase market share in the majority of its markets during this time.
3. Investments and productivity
Albertsons has been investing in technological improvements, which have aided its success during the pandemic, particularly in the online channel. It has partnered with Glympse for location sharing of store pickup and home delivery orders. It has also partnered with Takeoff Technologies for automated micro-fulfillment solutions to support its ecommerce efforts.
The retailer has been focusing on productivity and is targeting $1bn of annual run rate productivity benefits by the end of 2022 to help it offset cost inflation, fund growth and drive earnings. Some of these initiatives are already underway, however some have been paused during COVID-19 to enable Albertsons to focus on taking care of customers, employees and its local communities in the best way possible.
4. Strong private label positioning
With an economic recession likely to occur following the pandemic, the strength of Albertsons private label offering provides a competitive advantage, as it is well placed for an economic downturn. With private label sales of $13.1bn in 2019 and sales penetration of 25.4%, it plans to build on this success, and will be launching 800 new products annually over the next few years. It has also been developing its organics brand, O Organics, and this is one of its four private label ranges that exceed $1bn in sales annually. With an increased focus on health and wellbeing resulting from the pandemic, this is likely to be a key area of growth going forward.
Further detail on Albertsons strategies can be found here.
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