Deflation hits Albertsons’ sales

Date : 15 May 2017

We review Albertsons' latest results and opportunities to expand its operations in the US.

Cycling tough comparables

Albertsons' fourth quarter identical store sales fell by 3.3%, continuing the downward trend the retailer has experienced throughout the year. The major impact on its sales performance has been deflation in several key commodities, although it was also cycling a robust performance from the previous year. In 2015 it benefitted from disruption at a number of its former competitors, including A&P and Haggen. 

For the full year, sales increased by 1.6% to $59.7bn, however, identical store sales fell by 0.4%. Net losses came in at $131m for the full year. Against the backdrop of a challenging market, the retailer continues to push ahead with many sales-focused strategic initiatives and executing on its $800m synergy plan related to the acquisition of Safeway.

Operating playbook central to extracting value from acquired businesses

Central to this is its operating playbook which is focused on enhancing store standards and execution, investing in customer service, developing a compelling fresh food offer and maintaining price competitiveness. This latter element is underpinned by its private brand offer, with sales from its ranges increasing to $10.5bn last year. With a focus on improving the shopping experience, the retailer is planning on opening 15 new stores and upgrading and remodelling a further 150 this year.

Opportunities to build further scale

Albertsons continues to look at opportunities to enhance operations in existing markets and enter new ones. The retailer stated that it is currently participating in processes regarding several potential acquisition opportunities, including ones that would be material to its business. This month it is reported to have made a bid for 19 Strack & Van Til stores in the Chicago market through its Jewel-Osco chain.

It has also been linked to speculation around potential bids for Sprouts Farmers Market and Whole Foods Market. Beyond the benefit of further scale and the opportunity to optimise its cost structure, both retailers are attractive potential acquisitions. They have developed highly-differentiated retail concepts centred on fresh foods, natural and organic products, and healthy eating ranges. The formats would complement Albertsons’ existing supermarket concepts, and provide an opportunity to take best practices in fresh and prepared foods across the portfolio.

Stewart Samuel, Program Director, IGD Canada
Based in Canada, Stewart heads up all of IGD's research and coverage on Albertsons. He is also responsible for shaping IGD's research program across North America. Contact Stewart at [email protected] for further insight on the region.

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