Why Albertsons expects to emerge stronger, more resilient and more competitive than before

Date : 12 January 2021

Stewart Samuel

Program Director - Canada

We review Albertsons’ third quarter performance and the progress it’s making against its four strategic priorities.

Q3 key numbers

  • Sales and other revenue up 9.3% to $15.4bn
  • Identical store sales increased 12.3%
  • Digital sales growth of 225%
  • Operating income up 25.1% to $258.5m

Gaining millions of new households

The pandemic continues to drive elevated demand across the retailer’s business. Ecommerce sales continue to be strong, underpinned by its suite of fulfillment and delivery services. The business gained six million new households during the quarter, providing it with the confidence that it can sustain its performance for the long term. As has been seen through the pandemic, traffic is down but baskets are larger as customers consolidate their trips.

Expecting to sustain its performance

The strength of its performance saw it update its outlook for the full year, expecting identical store sales growth of 16.5%, compared to 15.5% previously. Despite the uncertain trading environment, it expects companies extending work-from-home policies and others moving to flexible work-from-home plans, will drive more breakfasts and lunches at home. Investment in fresh foods, meal solutions, its team and digital capabilities to tap into this opportunity, align with its four strategic priorities.

Source: IGD Research

1. Deliver in-store excellence

A focus on fresh is helping to drive traffic, especially with its most loyal customers. This has also been a catalyst for its omnichannel success, with fresh items increasing in the basket compared to pre-pandemic levels. It will also be expanding its meal solutions offer in the coming months as it adapts its foodservice model, especially salad bars. Additional refrigerated cases are being added to stores in preparation of the rollout of its meals programme.

Albertsons also sees a significant opportunity with private label, targeting key markets and new categories. With over 1,000 new products launched this year, including for its Value Corner brand and new family packs, it remains optimistic that it can take its private label penetration from 25% to 30% over the medium term.

2. Rapid acceleration of digital and omnichannel capabilities

As part of the 225% increase in digital sales, its store pickup programme grew over 800%. This was supported by its expansion to 231 additional stores, taking the total to almost 1,200 locations, forming part of a $300m investment to drive scale and profitability. The company plans to roll-out the programme to 1,800 stores by the end of fiscal 2021, firmly believing that the increased usage of digital channels will stick post-pandemic. As part of its focus on improving channel profitability it is planning on adding seven automated micro fulfillment centres by the end of fiscal 2021.

3. Driving productivity offset cost inflation

Albertsons remains on-track to deliver its anticipated savings this year and to achieve its $1bn in gross savings by the end of fiscal year 2022. Several initiatives are underway to support this including partnering with private label suppliers to reduce sourcing costs in key categories, lowering the cost of store remodels and driving energy efficiency projects.

4. Strengthen its talent and culture by strengthening the communities it serves

Several initiatives are underway as part of its diversity and inclusion agenda and those focused on customer and associate safety. During the quarter, it awarded a further $45m in discretionary bonuses. It is also partnering with the Department of Health and Human Services to administer free COVID-19 vaccines in the communities in which it operates.

Emerging stronger, more resilient and more competitive than before

The retailer’s president and CEO, Vivek Sankaran, struck an optimistic tone in commenting on the results and the prospects for the business. Growth in the customer base, new product ranges, accelerated investments in technology and its stores, and scaling up its omnichannel business provides it with the platforms to drive growth and emerge from the pandemic stronger, more resilient and more competitive than before.

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