Albertsons Cos. more than doubled Wall Street’s earnings-per-share forecast and saw net and identical sales climb by double digits for its fiscal 2020 second quarter.
For the 12-week quarter ended Sept. 12, net sales and other revenue totaled $15.76 billion, up 11.2% from $14.18 billion a year earlier, Albertsons said Tuesday. The Boise, Idaho-based grocer attributed the gain to a 13.8% year-over-year increase in identical sales, partially offset by lower fuel sales.
The second quarter marked Albertsons’ first reporting period since becoming a public company in late June.
“Many customers have shifted their shopping habits during the pandemic, and we’ve adapted quickly," Albertsons CEO Vivek Sankaran said. (Photo courtesy of Albertsons)
“I am pleased to say that our strategy is working, as demonstrated by our results this quarter that, by all measures, were outstanding,” President and CEO Vivek Sankaran told analysts in a conference call Tuesday. “Our team remains focused on our customers working hard to deliver an excellent shopping experience, whether they’re new to Albertsons or have been shopping with us for years. To our associates, thank you for working through the daily challenges and striving to give our customers an easy, exciting, friendly and safe experience.”
Digital sales again skyrocketed in the second quarter, jumping 243% from a year ago. That gain comes in the wake of 276% digital sales growth in the first quarter, driven by changing consumer behavior during the COVID-19 crisis.
“Many customers have shifted their shopping habits during the pandemic, and we’ve adapted quickly. In general, we are seeing customers continue to come to our stores less often but buy much larger baskets, including new categories as we filled their one-stop shopping needs,” Sankaran explained. “And many have chosen to use our e-commerce offerings, both home delivery and Drive Up & Go [curbside pickup], and overall have increased their household spending with us. This enduring secular shift in shopping habits is confirmed daily, despite the economy opening in most parts of the country.”
Albertsons Cos. stores also have been drawing shoppers from across the pricing spectrum, he added. “Importantly, all income segments have increased their spend with us,” he said. “We watched the impact of the recession closely, and we are increasing our traction even with lower-income shoppers who generally come [to the store] a bit more often and spend less per trip. We’re able to provide high-quality fresh [foods] and great value to them through our opening price points and own brands, and Just for U [loyalty program] personalized offers to make concentrating trips with us more attractive to the segment.”
Customer acquisition has been aided in part by the rollout of Drive Up & Go pickup service at more than 200 stores, Sankaran said. Albertsons now has 950 curbside pickup sites and is on track to have 1,400 locations by the fiscal year-end. The boom in digital sales also led Albertsons to accelerate its Drive Up & Go expansion from 1,600 store to at least 1,800 by the end of fiscal 2021.
“This e-commerce growth is often incremental to overall household spend across all customer segments,” Sankaran noted. “On average, we see a 27% increase with in-store customers engaged in e-commerce. It is even more incremental with less-engaged customers, who increased their spend with us 2.7 times when they use our e-commerce solutions. This incremental spend increases our overall profit per customer. DUG [Drive Up & Go] is the fastest-growing digital segment for us, growing over 1,000% year over year during the quarter, and it is overall accretive to earnings.”
At the bottom line, second-quarter net earnings came in at $284.5 million, or 49 cents per diluted share, compared with $294.8 million, or 51 cents per diluted share, in the prior-year period. during the second quarter of fiscal 2019.
Albertsons noted that net income in the fiscal 2019 included gains related to sale leaseback transactions. On an adjusted basis, net earnings in the 2020 quarter were $356.4 million, or 60 cents per share, versus $99.2 million, or 17 cents per diluted share, a year earlier.
Analysts, on average, had projected adjusted EPS at 25 cents, with estimates ranging from a low of 10 cents to a high of 39 cents, according to Refinitiv/Thomson Reuters.
For the fiscal 2020 first half, Albertsons’ sales and other revenue rose 17% to $38.51 billion from nearly $32.92 billion, with identical sales up 21% year over year.
Net earnings in the 28 weeks totaled $870.7 million, or $1.49 per diluted share, compared with $343.8 million, or 59 cents per diluted share, in the 2019 first half. Adjusted net income was $1.16 billion, or $1.95 per diluted share, versus $275.7 million, or 47 cents per diluted share, in the 2019 half.
“Since the beginning of fiscal 2020, we have experienced significant increases in product demand and overall basket size in stores and in our e-commerce business due in part to COVID-19 related demand,” Chief Financial Officer Robert Dimond said in the analyst call. “As a result, we are providing an updated fiscal 2020 outlook.”
Albertsons projects fiscal 2020 adjusted EPS of $2.75 per share to $2.85 and identical sales growth of at least 15.5% for the year. Analysts consensus earnings forecast is for adjusted EPS of $2.20, with projections running from a low of $1.76 to a high of $2.49, according to Refinitiv/Thomson Reuters.
“We are executing our strategy very well and are increasingly confident that these changes in dynamics we’'ll see as a result of the pandemic will have a lasting impact on our business and that we are well-positioned in response,” Dimond said.
In fiscal 2020, Albertsons expects capital expenditures to total $1.9 billion. The company so far has spent about $700 million during the first two quarters, including the completion of 132 store remodels, 86 of which were in the second quarter.
Albertsons, which was recently named Supermarket News' Retailer of the Year, finished the second quarter with 2,252 food and drug stores, including 1,725 pharmacies and 398 fuel centers, in 34 states and the District of Columbia under banners such as Albertsons, Safeway, Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen and Carrs.