Albertsons sees Q1 sales slip after cycling pandemic-fueled gains

Lapping pandemic-driven gains from a year ago, Albertsons Cos. saw fiscal 2021 first-quarter sales fall by double digits and reported key financial results on a two-year stacked basis to better illustrate its performance since the crisis.

Albertsons’ earnings per share in the quarter, meanwhile, topped Wall Street’s projection on both a reported and adjusted basis.

For the 16 weeks ended June 19, net sales and other revenue totaled $21.27 billion, down 6.5% from $22.75 billion a year earlier, Albertsons said Thursday. The decrease stemmed mainly from a 10% decline in identical sales due to periods of elevated demand at the onset of COVID-19, partially offset by higher fuel sales, the Boise, Idaho-based grocer noted. In the fiscal 2020 first quarter, net sales jumped by 21.4% and identical sales by 26.5%.

Albertsons said first-quarter 2021 identical sales excluding fuel were up 16.5% on a two-year stack. Digital sales growth was “sustained” in the quarter and climbed 276% on a two-year basis, the retailer reported. First-quarter 2020 e-commerce sales also had surged by 276%.

“We had a strong start to the year as we continued to execute our strategy,” President and CEO Vivek Sankaran (left) said in a statement (photo courtesy of Albertsons Cos.). “Our performance is clear evidence of the structural enhancements we have made to our business, as well as our ability to retain market share gains compared to pre-pandemic levels. We are closer to our customers than ever before and are well-positioned for continued success as we execute on our strategic priorities, leveraging our strengths in fresh, own brands and our accelerating digital transformation.”

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To help drive e-commerce expansion, Albertsons added over 320 new Drive Up & Go curbside pickup locations during the first quarter. The retailer said it had 1,740 total Drive Up & Go locations by the end of the quarter, and its digital order fulfillment performance stood at 95% on-time picking and delivery.

Albertsons also continued to expand its Own Brands private-label portfolio. The first quarter saw the grocer add 318 new items, raising Own Brands sales penetration to over 25%. In addition, the Just for U loyalty program's membership increased 18% to 26.7 million members. Actively engaged loyalty households grew 13% in the quarter, and Albertsons noted that engaged omnichannel customers spent four times more than exclusively in-store shoppers.

On the earnings side, Albertsons posted first-quarter 2021 net income of $444.8 million, or 78 cents per diluted Class A common share, compared with $586.2 million, or $1.00 per diluted Class A common share, a year ago. Adjusted net earnings came in at $517.5 million, or 89 cents per diluted Class A common share, versus $801.2 million, or $1.35 per diluted Class A common share, in the 2020 quarter.

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Analysts, on average, had forecast Albertsons’ adjusted first-quarter 2021 earnings per share at 67 cents, with estimates ranging from 59 cents to 77 cents, according to Refinitiv.

Albertsons said first-quarter net income had compound annual growth of 201.3% on a two-year stack, with gains of 212.2% per Class A common share on a GAAP basis and 72.2% per Class A common share on an adjusted basis.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) fell 22.6% to $1.31 billion in the 2021 first quarter but were up 22.1% on a two-year stack, Albertsons reported. Similarly, gross margin excluding fuel rose 10 basis points in the quarter and, on a two-year basis, grew 90 basis points. Selling, general and administrative expenses excluding fuel were up 115 basis points in the quarter yet down 75 basis points on a two-year stack.

Looking ahead, Albertsons raised its earnings and sales guidance for fiscal 2021. The company now projects full-year adjusted net EPS (Class A common shares) of $2.20 to $2.30, up from the previous estimate of $1.95 to $2.05.

Wall Street’s consensus fiscal 2021 adjusted EPS estimate is $1.98, with projections running from $1.08 to $2.23, according to Refinitiv.

Albertsons forecasts identical sales to decline 5% to 6%, compared with its earlier outlook of a 6% to 7.5% decrease. The updated identical-sales guidance represents two-year stacked growth of 10.9% to 11.9% versus 9.4% to 10.9% previously. Capital expenditures remain at $1.9 billion to $2.0 billion.

In the 2021 first quarter, Albertsons’ capital spending totaled $513.4 million, including digital and technology investments, the opening of five new stores and the completion of 33 store remodels.

As of the quarter’s end, Albertsons Cos. operated 2,278 retail food and drug stores in 34 states and the District of Columbia under such banners as 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 retailer’s operations also include 1,725 pharmacies, 399 fuel centers, 22 distribution centers and 20 manufacturing facilities.

*EDITOR'S NOTE:  Article updated with more e-commerce, customer loyalty and Own Brands information.