Albertsons sees second-quarter rebound

Albertsons Cos. topped the high end of Wall Street’s earnings forecast for its fiscal 2021 second quarter as net and identical sales surpassed last year’s pandemic-driven gains.

For the 12-week quarter ended Sept. 11, net sales and other revenue rose 4.7% to nearly $16.51 billion from $15.76 billion in the comparable period a year earlier, Albertsons reported Monday. The Boise, Idaho-based grocer said the increase reflects a 1.5% uptick in identical sales and higher fuel sales.

The net and identical sales gains came atop growth of 11.2% and 13.8%, respectively, in the fiscal 2020 second quarter and marked a rebound from decreases of 6.5% in net sales and 10% in identical sales in the 2021 first quarter.

“Our results for the quarter exceeded our internal plans across all key metrics, increasing our confidence in the business going forward,” President and CEO Vivek Sankaran told analysts in a conference call on Monday. “Our ID sales increased 1.5% in Q2 and 15.3% on a two-year stack basis. We continued to gain market share in food [retail] on a one- and two-year basis, and in MULO [multi-outlet retail] we are up on a two-year basis and down only slightly on a one-year basis.”

In-store traffic has continued to increase over the past year, Albertsons reported.

Customers’ return to shopping in brick-and-mortar stores provided a lift in the second quarter, according to Sankaran. He cited the impact of improving COVID-19 vaccination rates, to which Albertsons Cos.’ pharmacy team has contributed more than 7.5 million COVID vaccine doses administered.

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“We saw better than expected in-store results, as traffic in our stores continued to increase versus Q2 2020,” Sankaran said. “We believe the increased traffic is being driven by our ongoing efforts to protect the health and safety of our employees, customers and communities and the higher vaccination rates that are helping customers become more comfortable and returning to stores.”

Albertsons’ also got a boost from its Just for U customer loyalty program, as ongoing benefit enhancements grew membership 17% to 27.5 million in the second quarter.

“Within the program, the number of actively engaged members increased by almost 9%. Actively engaged members are those that are redeeming rewards, such as fuel or grocery rewards, in the current quarter,” Sankaran said. “In addition, we had a 93% retention rate with actively engaged members in Q2. Remember that actively engaged members spend approximately four times more with us.”

Digital sales at Albertsons were up 248% on a two-year stack basis through the 2021 second quarter.

On the e-commerce side, digital sales climbed 5% in the quarter, building on a 243% year-over-year gain in the fiscal 2020 quarter for two-year stacked growth of 248%.

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“The benefits of our digital and omnichannel investments continue to resonate with our customers,” noted Sankaran. “Our Drive Up & Go [curbside pickup] and home delivery capabilities, reaching 95% of our customers, increased omnichannel households by over four times versus Q2 2019, and retention has been strong. Omnichannel household growth is a key initiative, as these customers spend three times more than any in-store-only shopper. We also continue to drive year-over-year growth in identified households, another key initiative that is foundational to better understanding our customers through data analytics and allowing us to improve our offerings to drive recurring and incremental spend.”

At the bottom line, Albertsons posted fiscal 2021 second-quarter net earnings of $295.2 million, or 52 cents per diluted Class A common share, compared with $284.5 million, or 49 cents per diluted Class A common share, a year ago. Adjusted net income came in at $369.5 million, or 64 cents per diluted Class A common share, versus $356.4 million, or 60 cents per diluted Class A common share, in the prior-year period.

Analysts, on average, had projected adjusted earnings per share of 45 cents for the 2021 second quarter, with estimated ranging from a low of 31 cents to a high of 59 cents, according to Refinitiv.

As on the sales front, fiscal 2021 second-quarter earnings rebounded from first-quarter declines. Diluted EPS for the first quarter fell 22 cents on a GAAP basis and 46 cents on an adjusted basis.

For the 28-week fiscal 2021 first half, Albertsons totaled net income of $740 million, or $1.26 per diluted Class A common share, down from $870.7 million, or $1.49 per diluted Class A common share, in the comparable fiscal 2020 period, which reflected pandemic-fueled gains. Net sales and other revenue in the 2021 first half dipped 1.9% to $37.78 billion from $38.51 billion.

Looking ahead, Albertsons has raised its identical sales and adjusted earnings per share (EPS) forecast for the full 2021 fiscal year, President and Chief Financial Officer Sharon McCollam told analysts in the call.

“Given the outperformance in Q2 and recent trends, we have updated and raised our guidance for fiscal year 2021,” said McCollam, who took the reins as CFO on Sept. 7, succeeding Bob Dimond. “We now expect identical sales in fiscal 2021 in the range of negative 2.5% to 3.5%, compared to prior guidance of negative 5% to 6%, representing an updated two-year stacked ID range of 13.4% to 14.4%, compared to prior guidance of 10.9% to 11.9%. We expect adjusted EPS in the range of $2.50 to $2.60 per share, up 30 cents from our previous guidance range.”

Wall Street’s consensus forecast is for fiscal 2021 adjusted EPS of $2.28, with projections running from a low of $1.08 to a high of $2.60, according to Refinitiv.

Year to date, Albertsons has totaled capital expenditures of about $823 million, putting the company on target hit its expected range to $1.9 billion to $2 billion. Along with continued investments in technology and e-commerce, the retailer has opened seven new stores and completed 76 remodels.

Albertsons finished the second quarter with 2,278 food and drug stores in 34 states and the District of Columbia, up from 2,252 a year earlier, under more than 20 retail banners, including 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 company’s operations also include 1,725 pharmacies, 401 fuel stations, 22 distribution centers and 20 manufacturing plants.

“Our strong performance year to date and continuing positive trends give us the confidence to reach our full-year 2021 outlook,” Sankaran added.