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Albertsons announces strategic review of company

Supermarket giant’s board says ‘all possible paths towards maximizing value creation’ will be considered

Russell Redman

February 28, 2022

4 Min Read
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In announcing the review, Albertsons didn’t provide details but it's “aimed at enhancing Albertsons’ growth and maximizing shareholder value.”Albertsons Cos.

The Albertsons Cos. board of directors said it has begun a “review of potential strategic alternatives.”

In announcing the action late Monday, Boise, Idaho-based Albertsons didn’t provide details but reported that the move is “aimed at enhancing Albertsons’ growth and maximizing shareholder value.”

Albertsons, the nation’s second-largest supermarket operator, said it has retained Goldman Sachs and Credit Suisse as financial advisers for the review, which will gauge balance sheet optimization and capital return strategies, potential strategic or financial transactions, and development of other strategic initiatives to complement Albertsons’ existing businesses. The retailer said the review also will involve “responding to inquiries.”

“The board believes the continuing strength of our business and the scale of our portfolio of assets warrants a deep and considered review of all possible paths towards maximizing value creation,” Chan Galbato, Albertsons Cos. board co-chairman, said in a statement.

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In Albertsons' third-quarter report to analysts, CEO Vivek Sankaran cited the company's 'strong performance year-to-date.'

“Albertsons operates more than 2,270 stores across 34 states with growing digital and omnichannel capabilities, along with a vast dedicated manufacturing and distribution infrastructure, which have become integral to the fabric of communities across the U.S.,” Galbato explained. “The board believes that this review, coupled with an ongoing focus on accelerating our transformation strategy, will create enhanced value for all our stakeholders, including our customers, associates and investors.”

Related:Albertsons tapped to debut DoorDash express grocery delivery

Albertsons noted that the board hasn’t set a timetable for the review or made any decisions on possible actions and strategies. The company said it doesn’t plan to comment further at this time, adding that “there can be no assurance that the review will result in any transaction or other strategic change or outcome.”

Through the end of its fiscal 2021 third quarter ended Dec. 4, Albertsons Cos. had 2,278 food and drug stores in 34 states and the District of Columbia under more than 20 banners, such as Albertsons, Safeway, Vons, Jewel-Osco, Shaw's, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets and Balducci's Food Lovers Market. The company also operates 1,722 pharmacies, 399 fuel centers, 22 distribution centers and 20 manufacturing facilities.

On the supermarket front, Albertsons' most recent acquisition was Kings Food Markets and Balducci’s Food Lover’s Markets in late 2020. The $94.6 million auction purchase of 27 stores in New York, New Jersey and Connecticut, by Albertsons' Acme Markets chain, came after Kings and Balducci's parent KB US Holdings put the stores up for sale upon filing for Chapter 11 bankruptcy protection.

Related:Albertsons reaps stronger sales gains in third quarter

"Albertsons Cos. announced a strategic review of its business, sending the shares up sharply and investors scrambling on what could happen next. The most likely outcome, in our view, would be divesting underperforming banners to accelerate investments in areas like supply chain, technology and e-commerce. This could keep Albertsons competitive among big-box retailers (e.g. Walmart, Target), club stores (e.g. Costco) and online retailers (e.g. Amazon), all of which we think have the upper hand when it comes to competing in this new world of omnichannel retailing," CFRA Research analyst Arun Sundaram said in a research note.

"While Albertsons could put itself up for sale, this scenario is unlikely, in our view, given antitrust concerns during a time where food prices are already high," Sundaram wrote. "Plus, Albertsons is likely valued at over $25 billion for financial buyers, a hefty price in a rising interest rate environment. Regardless of the outcome, this strategic review should be viewed favorably given the company's desire to transform its business before pandemic-related tailwinds fully abate."

For the third quarter, Albertsons saw net sales and other revenue climb 8.6% to $16.73 billion, with identical sales up 5.2% year over year and 17.5% on a two-year stack. Online sales rose 9%, bringing growth to 234% over two years. Adjusted net earnings per share also topped Wall Street’s consensus estimate by 20 cents.

“Our strong performance year-to-date and the continuing positive trends give us the confidence to raise the fiscal 2021 outlook for ID sales, adjusted EBITDA and EPS,” Albertsons Cos. CEO Vivek Sankaran told analysts in January when reporting Q3 results. Sankaran has served as the retailer’s chief executive since April 2019.

In its most recently completed fiscal year, Albertsons reported 2020 net sales and other revenue of $69.69 billion, up 11.6% and including surges of 16.9% in identical sales and 258% in e-commerce sales. Adjusted EPS for the year exceeded analysts’ average estimate by 29 cents.

Albertsons made its debut as public company on June 26, 2020, with an initial public offering of $16 per share for 50 million shares of common stock, or $800 million. That represented a downsized offering from when the company launched the IPO on June 18 of that year.

Two previous attempts by Albertsons to become public were unsuccessful. In 2018, the company attempted to go public via a $24 billion merger with Rite Aid Corp., but the deal was terminated after investor pushback. Investors also tried to take Albertsons public after its 2015 merger with Safeway but wound up pulling the offering due to market conditions for retail stocks.

Albertsons is owned by an investment group led by private equity firm Cerberus Capital Management. Currently, Cerberus is the top institutional shareholder, with a 32.5% stake, followed by Lubert-Adler Management Co. with a 12.44% share.

*Editor's Note: Article updated with analyst comment.

About the Author

Russell Redman

Senior Editor
Supermarket News

Russell Redman has served as senior editor at Supermarket News since April 2018, his second tour with the publication. In his current role, he handles daily news coverage for the SN website and contributes news and features for the print magazine, as well as participates in special projects, podcasts and webinars and attends industry events. Russ joined SN from Racher Press Inc.’s Chain Drug Review and Mass Market Retailers magazines, where he served as desk/online editor for more than nine years, covering the food/drug/mass retail sector. 

Russell Redman’s more than 30 years of experience in journalism span a range of editorial manager, editor, reporter/writer and digital roles at a variety of publications and websites covering a breadth of industries, including retailing, pharmacy/health care, IT, digital home, financial technology, financial services, real estate/commercial property, pro audio/video and film. He started his career in 1989 as a local news reporter and editor, covering community news and politics in Long Island, N.Y. His background also includes an earlier stint at Supermarket News as center store editor and then financial editor in the mid-1990s. Russ holds a B.A. in journalism (minor in political science) from Hofstra University, where he also earned a certificate in digital/social media marketing in November 2016.

Russell Redman’s experience:

Supermarket News - Informa
Senior Editor 
April 2018 - present

Chain Drug Review/Mass Market Retailers - Racher Press
Desk/Online Editor 
Sept. 2008 - March 2018

CRN magazine - CMP Media
Managing Editor
May 2000 - June 2007

Bank Systems & Technology - Miller Freeman
Executive Editor/Managing Editor
Dec. 1996 - May 2000

Supermarket News - Fairchild Publications
Financial Editor/Associate Editor
April 1995 - Dec. 1996 

Shopping Centers Today Magazine - ICSC 
Desk Editor/Assistant Editor
Dec. 1992 - April 1995

Testa Communications
Assistant Editor/Contributing Editor (Music & Sound Retailer, Post, Producer, Sound & Communications and DJ Times magazines)
Jan. 1991 - Dec. 1992 

American Banker/Bond Buyer
Copy Editor
Oct. 1990 - Jan. 1991 

This Week newspaper - Chanry Communications
Reporter/Editor
May 1989 - July 1990

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