With pandemic-driven results now cycled, Albertsons Cos. saw a return to growth in its fiscal 2022 first quarter with strong gains in net and identical sales.
For the 16 weeks ended June 18, net sales and other revenue came in at $23.31 billion, up 9.6% from $21.27 billion a year earlier, when the top line fell 6.5% year over year, Albertsons said Tuesday. The Boise, Idaho-based grocer attributed the sales uptick to elevated identical (ID) sales and higher fuel sales, noting that retail price inflation lifted ID sales.
Identical (ID) sales rose 6.8% in the 2022 first quarter, rebounding from a 10% decline a year ago. Similarly, digital sales surged by 28% after flat results in the 2021 quarter, when online sales were up 276% on a two-year stack.
"This puts us in a strong position to continue to execute against our ‘Customers for Life’ strategy." — Albertsons Cos. CEO Vivek Sankaran (photo courtesy of Albertsons)
“In the first quarter, our teams continued to deliver strong operating and financial performance across all key metrics, and we continued to gain market share,” Albertsons Cos. CEO Vivek Sankaran said in a statement. “As we look forward to the balance of the year, while we are thoughtful about the macro environment and the possible implications on consumer behavior, our teams have consistently demonstrated their ability to adapt to a changing backdrop in real time. This puts us in a strong position to continue to execute against our ‘Customers for Life’ strategy, including more deeply engaging our customers both digitally and in-store and delivering against our productivity agenda. We are so proud of the resilience, agility and passion of our teams and their ongoing service to our customers and communities.”
Also on Tuesday, Albertsons gave an update on the company’s “strategic alternatives review” announced in late February. The retailer said it engaged a third party to appraise its real estate portfolio, and the evaluation pegged the value of its owned and ground-leased properties at $13.7 billion, up from $11.2 billion in 2019.
Albertsons also reported that it has extended a lock-up agreement with five of its largest shareholders (Cerberus Capital Management L.P., Kimco Realty Corp., Klaff Realty L.P., Lubert-Adler Partners and Jubilee Limited Partnership) to Sept. 10, as the pact had been due to expire June 30. Under the agreement, each sponsor agreed to restrictions on their ability to offer, sell, transfer, contract to sell, pledge or dispose of shares of Albertsons Cos. common stock during that time frame, which runs through the end of the company’s fiscal 2022 second fiscal quarter. Combined, the five sponsors own about 366.04 million common shares, or roughly 69%, of Albertsons’ approximately 531.59 million shares outstanding.
No timetable has been set by Albertsons’ board of directors for the strategic review. When announcing the action in February, the company said it had retained Goldman Sachs and Credit Suisse as financial advisers for the review, which will assess balance sheet optimization and capital return strategies, potential strategic or financial transactions, and the development of other strategic initiatives to complement Albertsons’ existing businesses. The retailer said the review also will entail “responding to inquiries.”
In reporting Albertsons’ fiscal 2021 in April, President and Chief Financial Officer Sharon McCollam told analysts that the company believes it’s undervalued versus competitors.
Online sales jumped 28% in the first quarter, compared with flat results cycling pandemic-fueled gains a year earlier.
“It was really sparked by the fact that valuation compared to peers was not reflecting the strength of our performance, and there were reasons in our mind for some of that,” McCollam said in a conference call at the time. “We outperformed Kroger in Q4, we outperformed them for the year, etc. So that was really, originally, the catalyst for us,” she explained. “And of course, there was the overhang of the preferred shares that had hit the market, and then the IPO lock-up that was coming.”
At the bottom line for the fiscal 2022 first quarter, Albertsons recorded net income of $484.2 million, or 84 cents per diluted Class A common share, compared with $444.8 million, or 78 cents per diluted Class A common share, a year ago. Adjusted net earnings totaled $582 million, or $1.00 per diluted Class A common share, versus $517.5 million, or 89 cents per diluted Class A common share, in the 2021 quarter.
Analysts, on average, had projected Albertsons’ adjusted first-quarter 2022 earnings per share at 92 cents, with estimates ranging from 79 cents to $1.11, according to Refinitiv.
Looking ahead, Albertsons raised its earnings and sales guidance for fiscal 2022. The company now forecasts full-year adjusted net EPS (Class A common shares) of $2.80 to $2.95, up from the previous estimate of $2.70 to $2.85. Wall Street’s consensus fiscal 2022 adjusted EPS estimate is $2.85, with projections running from $2.35 to $3.16, according to Refinitiv.
Albertsons estimates ID sales to grow 3% to 4% for fiscal 2022, up from its earlier outlook of a 2% to 3% uptick. Capital expenditures remain in the range of $2 billion to $2.1 billion.
In the 2022 first quarter, Albertsons’ capital spending totaled $613.8 million, mainly from investments in digital and technology platforms and store upgrades, including 27 remodels.
As of the quarter’s end, Albertsons Cos. operated 2,273 retail food and drug stores in 34 states and the District of Columbia under such banners 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 retailer’s operations also include 1,720 pharmacies, 402 fuel centers, 22 distribution centers and 19 manufacturing facilities.
