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Albertsons tallies identical sales gains in Q3

Supermarket giant cites growth in online grocery, private label

Russell Redman

January 7, 2020

4 Min Read
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Albertsons Cos. notched its eighth straight quarter of identical sales increases and reported improved operating results for its fiscal 2019 third quarter.

For the 12 weeks ended Nov. 30, net sales and other revenue totaled $14.10 billion, up 1.9% from $13.84 billion a year earlier, Albertsons said Tuesday. The Boise, Idaho-based grocer attributed the uptick to a 2.7% year-over-year gain in identical sales, partially offset by lower fuel sales and lost sales from store closings since the fiscal 2018 quarter.

Third-quarter identical sales growth eclipsed gains of 2.4% in the second quarter and 1.9% in the prior-year period. Albertsons noted that identical sales in the third quarter got a lift from 34% growth in online home delivery and Drive Up & Go pickup sales as well as increased Own Brands sales growth. The latter was driven in part by rising private-label sales penetration, which reach a new high of 25.6%, the retailer said. Identical sales include same-store and online sales but exclude fuel sales.

Also reflecting increased retail activity in the quarter were escalating registrations and digital coupon redemptions in the Just for U loyalty program, up 25% and 31%, respectively, according to Albertsons.

Gross profit margin increased to 28.3% during the third quarter of fiscal 2019 compared to 27.8% during the third quarter of fiscal 2018. Excluding the impact of fuel, gross profit margin increased 40 basis points compared to the third quarter of fiscal 2018, primarily due to improved product mix, including increased Own Brands penetration and lower shrink expense, partially offset by higher rent expense related to sale leaseback transactions.

Related:Albertsons highlights Own Brands via Pinterest

"Our identical sales momentum continued in the third quarter, as our core business continues to deliver strong growth," Albertsons Cos. President and CEO Vivek 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."

At the bottom line, 2019 third-quarter net earnings came in at $54.8 million, compared with $45.6 million a year ago. Albertsons noted that income tax expense was $12.9 million in the 2019 quarter versus an income tax benefit of $65.4 million in the prior-year period.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $634.4 million, or 4.5% of sales, compared with from $649.7 million, or 4.7% of sales, a year earlier. Despite the decline, Albertsons called the result “slightly ahead of expectations.” The company said the decrease stems mainly from strategic investments in digital and technology initiatives and higher rent and occupancy costs from sale-leaseback transactions, offset by identical sales growth and improvements in shrink expense.

Related:Albertsons, Takeoff Technologies expand automation partnership

"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," Sankaran added.

For the 40 weeks through Nov. 30, Albertsons saw sales and other revenue edge up 1.1% year over year to $47.02 billion, with identical sales up 2.1%. Gross margin rose to 28% from 27.6%. The company posted net income of $398.6 million versus a net loss of $4.5 million in the year-ago period. Adjusted EBITDA for the 40 weeks was $2.08 billion, or 4.4% of sales, up from $2.01 billion, or 4.3% of sales, in the 2018 period.

Albertsons said that, since the start of fiscal 2019, the company has cut its outstanding debt by more than $1.8 billion. As of the end of the third quarter, the ratio of total net debt to adjusted EBITDA stood at 3.0x, down from 3.9x at the close of the 2018 quarter. Interest expense totaled $557.5 million during the first 40 weeks of fiscal 2019, down from $662.5 million in the prior-year period.

Capital expenditures came in at about $1.1 billion for the fiscal 2019 year to date and included investments in technology, 153 store remodels and 12 new-store openings, Albertsons said.

As of Nov. 30, Albertsons Cos. operated 2,260 food and drug stores, versus 2,277 a year earlier. The retailer also has 1,732 pharmacies, 402 associated fuel centers, 23 dedicated distribution centers and 20 manufacturing facilities. Store banners include Albertsons, Safeway, Vons, Pavilions, Randalls, Tom Thumb, Carrs, Jewel-Osco, Acme, Shaw's, Star Market, United Supermarkets, Market Street, Amigos, Haggen and United Express.

About the Author

Russell Redman

Senior Editor
Supermarket News

Russell Redman has served as senior editor at Supermarket News since April 2018, his second tour with the publication. In his current role, he handles daily news coverage for the SN website and contributes news and features for the print magazine, as well as participates in special projects, podcasts and webinars and attends industry events. Russ joined SN from Racher Press Inc.’s Chain Drug Review and Mass Market Retailers magazines, where he served as desk/online editor for more than nine years, covering the food/drug/mass retail sector. 

Russell Redman’s more than 30 years of experience in journalism span a range of editorial manager, editor, reporter/writer and digital roles at a variety of publications and websites covering a breadth of industries, including retailing, pharmacy/health care, IT, digital home, financial technology, financial services, real estate/commercial property, pro audio/video and film. He started his career in 1989 as a local news reporter and editor, covering community news and politics in Long Island, N.Y. His background also includes an earlier stint at Supermarket News as center store editor and then financial editor in the mid-1990s. Russ holds a B.A. in journalism (minor in political science) from Hofstra University, where he also earned a certificate in digital/social media marketing in November 2016.

Russell Redman’s experience:

Supermarket News - Informa
Senior Editor 
April 2018 - present

Chain Drug Review/Mass Market Retailers - Racher Press
Desk/Online Editor 
Sept. 2008 - March 2018

CRN magazine - CMP Media
Managing Editor
May 2000 - June 2007

Bank Systems & Technology - Miller Freeman
Executive Editor/Managing Editor
Dec. 1996 - May 2000

Supermarket News - Fairchild Publications
Financial Editor/Associate Editor
April 1995 - Dec. 1996 

Shopping Centers Today Magazine - ICSC 
Desk Editor/Assistant Editor
Dec. 1992 - April 1995

Testa Communications
Assistant Editor/Contributing Editor (Music & Sound Retailer, Post, Producer, Sound & Communications and DJ Times magazines)
Jan. 1991 - Dec. 1992 

American Banker/Bond Buyer
Copy Editor
Oct. 1990 - Jan. 1991 

This Week newspaper - Chanry Communications
Reporter/Editor
May 1989 - July 1990

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