Albertsons Cos. is gearing up “four engines of growth” to become a more efficient, customer-focused and omnichannel retailer, according to President and CEO Vivek Sankaran.
The nation’s second-largest supermarket operator reported improved results yesterday for its fiscal 2019 second quarter ended Sept. 7, including its seventh consecutive quarter of identical-store sales gains and strongest identical-sales performance in more than three years. E-commerce sales grew 40% year over year.
In addition, Boise, Idaho-based Albertsons posted net earnings of $294.8 million for the quarter, compared with a net loss of $32.4 million a year earlier.
“I continue to be encouraged about the prospects of our business and our ability to grow it as we enhance the customer experience in-store and online and improve our operating performance,” Sankaran (left) told analysts yesterday in a conference call. “Over the last few years, we've brought together iconic retail brands with a rich heritage and a strong local following. We now have the ability to be locally great and nationally strong with almost 2,300 stores and a robust online offering. We are important to customers in many attractive markets. We operate in 120 MSAs [metropolitan statistical areas] and ranked No. 1 or No. 2 in 68% of those MSAs. In 65% of those 120 MSAs we operate in, the projected population growth over the next five years in aggregate exceeds the national average by over 50%.
“In summary, we have great locations, in attractive and growing markets and have strong market share in those markets,” he said. “As I've mentioned last quarter, since integration related to the Safeway merger is behind us, we are now able to focus on profitably growing our business.”
Albertsons’ “four engines of growth” are its stores, e-commerce, customer loyalty and private label, Sankaran said.
“The first growth driver is our stores, a core of our business. We continue to enhance our everyday store operations, with a strong focus on the customer experience as well as improvements in productivity,” he explained. “Ease of shopping is central to our approach. Our goal is to provide customers with a variety of the items they want, in stock and easy to find, with a seamless checkout experience. This may be high-touch, warm and friendly or completely frictionless to self-checkouts, based on their needs. We strive to provide customers with an exciting sensory experience, driven by excellent quality, fresh especially needed produce and great solutions for meal within our delis.”
That includes expanded self-checkout. As of the end of the second quarter, Albertsons offered self-checkout stations in 1,075 stores, most recently adding over 1,130 new self-checkout lanes and upgrading 91 existing lanes in 245 stores. Plans call for the company to install another 460 new self-checkout lanes and upgrade 112 lanes in 131 stores by the end of fiscal 2019, which would give it 1,162 stores with self-checkout.
During the 2019 first half, Albertsons opened seven new stores and remodeled 99 stores as part of $716 million in capital expenditures.
Sankaran noted that Albertsons also is stepping up use of technology in stores to automate processes, assist on competitive pricing and promotions and enhance labor scheduling.
“For example, we plan to rollout an upgraded pricing and promotional tool during the fourth quarter that will drive better pricing and margin optimization and allows to invest in areas that have the highest impact for our customers,” he said in the call.
On the loyalty side, Albertsons’ Just for U rewards program saw shopper enrollments rise 24% year over year in the second quarter. And in September, the retailer expanded its Gas Rewards to enable Safeway, Acme, Shaw’s and Star Market customers who sign up to earn from eligible grocery, pharmacy and gift card purchases and redeem rewards at about 1,500 Exxon and Mobil stations in 15 states and the District of Columbia.
"We continue to invest in digital marketing and customer acquisition programs to build our base of engaged shoppers. Our goal is to grow the base and get a larger share wallet by providing offers that are meaningful and personalized to our customers,” said Sankaran. “This expanding loyalty program continues to enrich our data or enhance marketing and merchandising. The data is the core of our customer-centric merchandising efforts to optimize our assortments and product placement and maximize the effectiveness of our pricing and promotion strategies. Ultimately, loyal customers are motivated to spend more with us.”
Expanded online grocery service, including both delivery and pickup, is key as well. Albertsons aims to grow its Drive Up & Go click-and-collect program from 500 stores now to about 600 stores by the end of 2019, with more sites in 2020.
“A recent analysis shows that those who engage with us online spend substantially more than those who do not. So engaging with our customers online should lead to increases in share of wallet. In the second quarter, [e-commerce] sales grew 40% and in many cases we grew overall spend with existing in-store customers. We're making it easier for our customers to engage with us when, where and how they choose, and we continue to enhance our websites and mobile applications for e-commerce to ensure they are convenient and user-friendly,” Sankaran told analysts. “Our growth in this area will be assisted by technology, with improved customer-facing websites, use of micro fulfillment centers and integration with third-party delivery services as we see where customer demand is strongest.”
For the second quarter, Albertsons reported private-label penetration of 25.3%, the same as in the previous quarter. The company’s Own Brands portfolio now encompasses 10 primary brands, with four — Lucerne, O Organics, Signature and Signature Café — topping $1 billion in annual sales. In fiscal 2019, more than 800 new Own Brands products are slated to be added, including 439 new items launched during the first half of the year. Last month, Albertsons revamped its lineup of frozen Own Brands entrees with 55 new items, including organic plant-based meals.
“The portfolio is distinctive, and it drives loyalty to our stores and online offerings, as many of our products are unique and cannot be found elsewhere,” Sankaran said. “We believe our customers look for quality products at a value, and our portfolio absolutely meets that customer need. We pride ourselves on great-quality products and a wide choices to meet all lifestyle needs.”
He added that Albertsons also is driving improved productivity, including by leveraging its scale to boost efficiency and rein in costs. The company operates 2,262 food and drug stores in 34 states and the District of Columbia under 20 retail banners. Its operations also include 1,733 pharmacies, 401 fuel centers, 23 distribution centers and 20 manufacturing facilities.
“We're working closely with our suppliers to take advantage of our national scale and make it easier for them to work with us,” Sankaran said. “We're taking a close look at indirect spend, and we'll use our sizing scale to buy better. We also continue to focus on better ordering, product preparation and [solutions] that reduce shrink.”