Albertsons Reports Strong Sales Growth in Third Quarter

Albertsons Cos. reported strong sales in its fiscal 2018 third quarter, marking the retailer’s strongest identical sales increase in two years.

Over the 12 weeks ending Dec. 1, 2018, Albertsons’ sales and other revenue increased 1.8% to $13.8 billion, which the company said was driven by a 1.9% increase in identical sales and higher fuel sales of $91.7 million, and partially offset by a reduction in sales related to the stores closed in the first three quarters of fiscal 2018.

Albertsons also reported e-commerce sales growth of 73%, following the Boise-based retailer’s recent launch of its online Albertsons Marketplace and O Organics Market, which debuted in July. The company also reported Own Brand sales penetration grew to an all-time high of 25.2%.

"We continue to gain traction in our efforts to deliver a seamless shopping experience for our customers in both the four-wall and no-wall environment," Jim Donald, Albertsons president and CEO, said in a statement. "The third quarter marked our strongest identical sales increase since the first quarter of fiscal 2016. Identical sales grew for the fourth consecutive quarter, and adjusted EBITDA (earnings before interest, tax, depreciation and amortization) grew more than 50% compared to the same quarter last year, as the business has rebounded from fiscal 2017. We achieved a record high sales penetration rate on our Own Brands products as we continue to delight our customers with our portfolio of award-winning brands."

Albertsons’ gross profit margin increased to 27.8% compared to 26.7% during the same period a year ago, which the retailer attributed to improved shrink expense as a percentage of sales, lower advertising costs, improved private label penetration and cost reduction initiatives.

The company’s net income was $45.6 million compared to $218.1 million during the third quarter of fiscal 2017, and its adjusted EBITDA increased over 50% to $649.7 million, or 4.7% of sales, during third-quarter fiscal 2018, reflecting Albertsons’ identical sales performance, increased gross profit and cost reduction initiatives, the company said.

Albertsons’ sales and other revenue increased 1.4% to $46.5 billion during the first 40 weeks of fiscal 2018 compared to $45.9 billion over the same period in fiscal 2017, which the company said was primarily driven by its 0.9% increase in identical sales and an increase in fuel sales of $386.1 million, while gross profit margin increased to 27.6% during the first 40 weeks of fiscal 2018. Net loss was $4.5 million over the same period compared to $342 million during the first 40 weeks of fiscal 2017.

"We also successfully refinanced our term loan and asset-based loan facilities during the quarter as we secure long-term financing and de-lever our balance sheet," Donald said in a statement.

Albertsons reduced its principal debt balance by approximately $1 billion and refinanced both its term loan and asset-based loan facilities. It also paid down approximately $976 million in aggregate principal amount of term loans using cash on hand and about $410 million of borrowings under its asset-based loan facility.

Albertsons also repaid $610 million in borrowings under its asset-based loan facility and, as of the date of its earnings report, had no borrowings outstanding under its $4 billion asset-based loan facility, and total availability of approximately $3.4 billion. The company also completed the sale and leaseback of five distribution centers in a $660 million two-part transaction, which closed Dec. 17 and Jan. 2, respectively.

Overall, Albertsons said it was pleased with its financial performance given the elevated level of integration activities and continued investment in the expansion of its digital and e-commerce services. Given its recent sale and leaseback of five distribution centers, fiscal 2018 results are expected to be impacted by approximately $17 million in incremental expense, which the company believes will negatively impact its fiscal 2018 adjusted EBITDA margin by approximately 10 basis points.