Albertsons gets Q2 lift from identical-store sales, online grocery

Albertsons Cos. kept up its string of identical-store sales gains in the fiscal 2019 second quarter, fueled in part by strong online grocery sales.

For the 12 weeks ended Sept. 7, net sales and other revenue totaled $14.18 billion, up 1.1% from $14.02 billion in the comparable period a year ago. Albertsons said Wednesday that the increase reflects a 2.4% increase in identical sales, partially offset by lower fuel sales and the impact of store closures since the fiscal 2018 quarter.

The Boise, Idaho-based grocer noted that identical sales got a boost from higher private-label sales and 40% growth in online home delivery and Drive Up & Go store pickup sales. Increased fuel margins and private-brand penetration (to 25.3%), among other factors, also helped lift gross profit margin to 27.8% from 27.2% a year earlier. Excluding fuel, gross profit margin was up 30 basis points.

"The strong momentum in the business continued in the second quarter. Our identical sales were positive for the seventh consecutive quarter and represented our strongest identical-sales performance in over three years as we continue to elevate the shopping experience for our customers. We are focused on driving sales growth by running the best stores, growing our loyal customer base, winning in e-commerce and enhancing our Own Brands portfolio," Albertsons Cos. President and CEO Vivek Sankaran (left) said in a statement.

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"At the same time, we are making strategic investments in the business to better leverage our scale, which are improving productivity and driving cost reductions," Sankaran added.

At the bottom line, Albertsons’ net earnings came in at $294.8 million for the 2019 second quarter, compared with a net loss of $32.4 million in the prior-year period.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) rose to $567.6 million, or 4% of sales, in the 2019 quarter from $548.6 million, or 3.9% of sales, a year ago. Albertsons attributed the gain mainly to increased identical sales and higher gross profit margin, partially offset by strategic investments in digital and technology initiatives, higher employee wage and benefit costs, and incremental rent expenses from sale-leaseback transactions.

For the 2019 first half, covering 28 weeks, sales and other revenue edged up 0.7% to $32.92 billion from $32.68 billion in the comparable 2018 period. Identical sales grew 1.9% year over year. Gross margin rose 40 basis points to 27.9%; excluding fuel, the gain was 20 basis points

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Net income totaled $343.8 million for the half versus a net loss of $50.1 million a year earlier. Adjusted EBITDA climbed to $1.44 billion, or 4.4% of sales, during 28 weeks from $1.36 billion, or 4.2% of sales, in in the year-ago period.

Albertsons noted that it has reduced outstanding debt by more than $1.8 billion in the fiscal 2019 year to date, with its ratio of total net debt to adjusted EBITDA decreasing to 2.9x. The company’s long-term debt and financial lease obligations were $8.63 billion at the end of the 2019 second quarter, compared with $10.44 billion in the 2018 quarter.

During the 2019 first half, Albertsons opened seven new stores and completed 99 store remodels as part of $716 million in capital expenditures. As of Sept. 7, the company had 2,262 retail food and drug stores, compared with 2,291 a year earlier, in 34 states and the District of Columbia under the banners Albertsons, Safeway, Vons, Pavilions, Randalls, Tom Thumb, Carrs, Jewel-Osco, Acme, Shaw's, Star Market, United Supermarkets, Market Street, Amigos, Haggen and United Express. Operations also include 1,733 pharmacies, 401 fuel centers, 23 distribution centers and 20 manufacturing facilities.

During the 2019 second quarter, Albertsons also finalized the sale and leaseback of 53 store properties and one distribution center for an aggregate purchase price (net of closing costs) of $931.3 million. Lease agreements for each of the properties have initial terms ranging from 15 to 20 years, the company said.