Albertsons, the second-largest supermarket chain in the country, is once again considering going public.
The Wall Street Journal on Monday reported that the Boise, Idaho-based operator of more than 2,200 grocery stores is expected to decide within the next few weeks whether to proceed with an initial public offering that could value it at around $19 billion. Citing people familiar with the matter, the Journal reports that Albertsons, which is owned by private equity firm Cerberus Capital Management, has been updating IPO documents that have been filed confidentially with the Securities and Exchange Commission.
After Albertsons’ 2015 merger with Safeway, investors tried to take the company public, looking to raise as much as $1.6 billion in an IPO, but then pulled the offering amid lackluster market conditions for retail stocks in late 2015. In 2018, the company attempted to go public with a $24 billion merger deal with Rite Aid Corp., which fell apart due to investor pushback in August 2018.
The struggling Albertsons had sought to boost its scale, extend its geographic reach and create more synergies to compete against larger, better-capitalized grocery retail rivals — including Walmart, Kroger and Costco — as well as e-tail behemoth Amazon after its acquisition of Whole Foods Market. Underscoring Albertsons’ predicament after the failed Rite Aid deal, a month afterward the company promoted president Jim Donald to CEO and then, six months later, hired Vivek Sankaran from PepsiCo to take over the CEO role. Those developments gave industry observers a negative view of Albertsons’ growth prospects.
Now, after less than a year at the helm, Sankaran (left) has re-established the supermarket giant as a force to be reckoned with. He has said that Albertsons is now focused on “four engines of growth”: its stores, e-commerce, customer loyalty and private label. In the most recently reported quarter, the company’s identical-store sales growth was the strongest in three years, and online grocery delivery and pickup sales surged 40%.
“Albertson's business is stronger than I ever thought it could be at this stage,” analyst Scott Mushkin, founder and CEO of R5 Capital, said at SN’s 2019 Financial Analyst Roundtable in October.
Albertsons, which partners with Instacart for home delivery, aimed to have Drive Up & Go pickup service at about 600 of its more than 2,200 stores as of the end of 2019, with more sites to come in 2020. The grocer’s Own Brands portfolio now includes 10 primary brands, with four — Lucerne, O Organics, Signature and Signature Café — topping $1 billion in annual sales. More than 800 new Own Brands products are slated to be added during fiscal 2019.
What’s more, Albertsons has been proactive on the technology front, including an expanded alliance with Takeoff Technologies to open micro-fulfillment centers for online grocery orders. Other efforts include the reintroduction of self-checkout (now in roughly 1,100 stores) and a sweeping partnership with Microsoft to create a seamless omnichannel shopping experience.
In its third-quarter earnings report on Jan. 7, Albertsons notched its eighth straight quarter of identical sales increases and reported improved operating results for its fiscal 2019 third quarter.
"Our identical sales momentum continued in the third quarter, as our core business continues to deliver strong growth," Sankaran said in a statement. "We are focused on providing our customers with an easy shopping experience, exciting merchandise and friendly customer service in our omnichannel shopping environment, and creating deep and lasting customer relationships."
"Our productivity and cost reduction initiatives are also beginning to take shape, which we intend to use to fund strategic growth investments, offset cost inflation and support earnings growth," he added.