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Albertsons' Jim Donald sees ‘improving momentum’

Q1 results are promising prelude to Rite Aid merger, says COO

Albertsons Cos. President and Chief Operating Officer Jim Donald said the company’s first-quarter performance shows it’s on the right track as it edges closer to wrapping up its acquisition of Rite Aid Corp.

“Our results in the first quarter clearly demonstrate the improving momentum of our company and its 22 banners. And we’re looking to continue this throughout the rest of 2018 and as we look ahead to the close of our proposed merger with Rite Aid,” Donald told Supermarket News in an interview yesterday.

Jim Donald
Photo: Albertsons

Albertsons reported a 1% gain in sales to $18.7 billion for the quarter ended June 16, with same-store sales up 0.2% and fuel sales rising by $154.1 million. The company said adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) exceeded expectations, climbing 5.7% to $815.8 million. And at the bottom line, Albertsons shrank its net loss to $17.7 million from $204.9 million a year ago.

The Safeway integration also is going as planned, with 243 stores converted during the first quarter, according to Donald. He said the company finished converting stores in the Jewel division last week and is now underway with the conversion of 175 stores in its Acme division.

E-commerce sales jumped 108% year over year and were a first-quarter highlight, Donald noted. “We’re very pleased with that as we continue to set the stage for further growth,” he said.

To that end, Albertsons offers Instacart online grocery delivery in about 1,800 stores now and plans to make the on-demand service available in 2,000 stores by the close of 2018. The retailer, too, aims to have its Drive Up & Go click-and-collect service at 500 stores by the year’s end.

Donald said offerings from Plated, its meal kit subsidiary, are now in 250 stores. Earlier this year, Albertsons said it expects to have the meal kits in hundreds of stores by the end of the year.

Private label penetration also rose 56 basis points to 24% in the first quarter. This year, Albertsons plans more than 400 new own-brand products, led by its billion-dollar O Organics label.

Combining with Rite Aid will enable Albertsons to better cater to today’s health and wellness-conscious consumer, as the supermarket retailer will more than double its pharmacy counters and get access to the drug chain’s EnvisionRx pharmacy benefits management network and services. The merged company also will have extensive scale on both the East and West Coasts.

“That is an operator’s dream come true in realizing synergies from both a cost perspective and revenue perspective,” Donald said. The companies also will use data analytics to integrate their loyalty programs and bring Albertsons’ own-brand food and fresh items to Rite Aid’s front end and, in turn, Rite Aid’s health and beauty brands to Albertsons stores.

“Nobody has ever put together a drug channel play and a grocery channel play like this,” Donald said.

Rite Aid’s Wellness Store format, for example, could carry Plated meal kits meeting customers’ dietary needs, such as gluten-free, vegetarian or vegan offerings, according to Donald. “There’s also the opportunity to offer meal kits to Rite Aid customers with certain diseases,” he said.

And Donald sees Albertsons’ O Organics brand, which is growing by double digits, as becoming a “mainstay” at Rite Aid stores. “We think that’s going to be a nice addition,” he said.

With Rite Aid’s smaller stores and Albertsons’ supermarkets, the combined company also will be able to better meet the needs of different kinds of shopping trips, Donald added.

“While the Millennials are coming at us in full force, we still have a large Baby Boomer crowd. There are two types of trips: a stock-up trip and a quick trip. By partnering with Rite Aid, we think we can capture most of the quick-trip business in all of the areas where we operate together,” he said.

Albertsons Cos. currently operates 2,300 supermarkets and 1,762 pharmacies. Its 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. Following the merger with Rite Aid, the company would have 4,868 stores under 22 banners, including 4,327 stand-alone and in-store pharmacies across 38 states and the District of Columbia.

Rite Aid shareholders are scheduled to vote on the merger deal Aug. 9. The companies expect the transaction to close in the second half of this year.

“We’re excited about getting the integration going,” Donald said, “and think it’s going to create an unbelievable health and wellness company and provide all of our fresh offerings to a brand-new set of consumers.”

Learn more about grocery delivery, meal kits and more at the inaugural SN Summit, held Oct. 1-3 in Dallas, the only conference where food retailers and restaurateurs learn from each other.

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