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Albertsons Cos. sees digital and e-commerce sales surge

In first quarter, company reverses year-ago net loss, cuts debt

Russell Redman

July 24, 2019

4 Min Read
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Rising identical-store sales lifted the top line in the fiscal 2019 first quarter at Albertsons Cos., which posted earnings for the period versus a prior-year net loss.

For the 16-week first quarter ended June 15, sales and other revenue edged up 0.5% to $18.74 billion from $18.65 billion for the comparable period a year ago, Albertsons said Wednesday. The Boise, Idaho-based grocery retailer attributed the gain to a 1.5% increase in identical-store sales, partially offset by sales lost from store closures during the quarter and in fiscal 2018.

Digital and e-commerce sales surged 33% year over year in the quarter, while sales penetration for private brands reached 25.3%, Albertsons noted.

Better-than-expected fuel margins boosted gross profit margin to 28% from 27.7% in the fiscal 2018 quarter, the retailer said. Excluding the impact of fuel, gross profit margin rose 10 basis points year over year. Improved shrink expense and lower advertising costs were partially offset by industrywide reimbursement rate pressures in pharmacy, according to the company.

Selling and administrative expenses declined to 26.2% of sales in 2019 first quarter from 26.7% a year earlier. The decrease was 50 basis points excluding fuel. Albertsons said the improvement reflects lower acquisition and integration costs from Safeway store system conversions completed during fiscal 2018, as well as progress in the company’s ongoing cost-reduction efforts.

Related:Albertsons talks e-commerce at Digital Food & Beverage conference

At the bottom line, Albertsons turned in net earnings of $49 million, compared with a net loss of $17.7 million during the 2018 quarter. Sales gains, higher fuel margins and cost reductions also lifted adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to $876.8 million, or 4.7% of sales, from $815.8 million, or 4.4% of sales, a year ago, the retailer said.

Vivik_Sankaran_Albertsons.png“I am pleased with the position of our business at Albertsons Cos.,” President and CEO Vivek Sankaran (left) said in a statement. "Identical sales were positive for the sixth consecutive quarter, and we continue to expand our e-commerce and digital capabilities. We are focused on our sales momentum and will continue to elevate the end-to-end customer experience as we work to create a next-generation food retailer.”

The 2019 first quarter marked Sankaran’s first reporting period as Albertsons’ chief executive. He took the reins from Jim Donald, who became co-chairman, on April 25.

"We also continue to delever the balance sheet, which will reduce interest expense and increase financial flexibility," Sankaran added.

Related:Albertsons to deploy self-checkout across banners

As of the end of the 2019 first quarter, Albertsons’ total net-debt-to-adjusted EBITDA ratio decreased to 3.3x from 3.5x at the close of its 2018 fiscal year.

Interest expense fell to $225.2 million in the 2019 first quarter from $254.6 million a year earlier, primarily due to lower average outstanding borrowings, Albertsons said. The company reported a $42.7 million loss on debt extinguishment in the 2019 quarter mainly from the write-off of debt discounts from refinancing transactions.

On June 7, subsidiaries Safeway Inc. and New Albertsons L.P. (NALP) finalized a tender offer for an aggregate of seven outstanding notes. In total, the company repurchased $437 million of par value of the notes for about $415 million in cash plus accrued and unpaid interest. Also during the 2019 first quarter, $301 million of par value of NALP notes were repurcashed for $294 million in cash and accrued and unpaid interest. The company also repurchased $253 million of NALP notes at par before the end of the quarter.

Albertsons said that, overall, it has cut the amount of outstanding Safeway and NALP notes by almost $1 billion to date in fiscal 2019.

To pay down additional debt, Albertsons said it aims to use net proceeds of about $886 million from two sale/leaseback transactions completed in the first quarter. The transactions involved 50 store properties and one distribution center.

On the expansion front, Albertsons made capital expenditures of approximately $362 million during the first quarter, including e-commerce and digital technology investments, 28 store remodels and the opening of six new stores.

“We recognize the ever-changing retail consumer and are working swiftly to adapt our business to allow customers to shop with us whenever, wherever and however they want," Sankaran said.

As of June 15, Albertsons Cos. operated 2,268 retail food and drug stores, including 1,739 pharmacies and 399 fuel stations, as well as 23 distribution centers, six Plated meal-kit fulfillment centers and 20 manufacturing plants. The company's store banners include Albertsons, Safeway, Vons, Pavilions, Randalls, Tom Thumb, Carrs, Sav-On, Jewel-Osco, Acme, Shaw's, Star Market, United Supermarkets, Market Street, Amigos, Haggen and United Express.

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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