As Albertsons, the second largest supermarket operator in the US, plans for an initial public offering (IPO) of its shares, we review how it’s improving the performance of its acquired businesses.
Major operator in the US grocery sector
Albertsons emerged as major grocery retailer in the US following the acquisition of almost 900 stores from Supervalu in 2013 and the Safeway US business earlier this year. Since acquiring Safeway, the focus has been on integration activities, including driving sales growth through the transfer of best practices and delivering planned cost savings. The business expects to deliver annual run-rate synergies of approximately $440m by the end of the current financial year.
Operating playbook improving acquired businesses
On a pro-forma basis, the business delivered sales of $57.5bn last year from a network of over 2,200 stores. Excluding Safeway, identical store sales grew by 7.2%, with Safeway’s identical store sales up 3.0%. With the deal closing in January, Albertsons believes that it can significantly improve Safeway’s performance through applying its operating playbook which includes a focus on high store standards, delivering superior customer service, providing a compelling product offering, offering an attractive value proposition and driving innovation across its network of stores. Results from the acquired Supervalu stores have improved significantly following the application of this playbook.
The strategy moving forward
The retailer's growth strategy is mainly focused around driving improvements in identical store sales growth. Initiatives include enhancing and upgrading its fresh, natural and organic products, investing in its private label ranges, extending its loyalty programs, and expanding its ecommerce operations. In many of these areas it will be drawing on Safeway’s leadership. With a significant store estate, portfolio improvements will also play an important role, including investing in pharmacy and health wellness initiatives. With the IPO planned, the retailer will be hoping that investors will buy into this strategy and the growth in sales, and profitability which it will be aiming to deliver.
Grocery ecommerce is a key growth pillar for Albertsons. See how the US stacks up against other global markets in our Top Ten Global Online Markets report.