Albertsons sees sales rise over 20% in Q1 2020

On the heels of debuting as a publicly traded company in June, Albertsons Cos. continued its streak of strong sales with its first-quarter 2020 earnings report showing sales up by 21.4% to $22.8 billion during the 16 weeks ended June 20, 2020.

The increase was driven by the Boise, Idaho-based supermarket retailer’s 26.5% increase in identical sales, partially offset by a reduction in sales related to store closures and lower fuel sales. Identical sales benefited from a whopping 276% growth in digital sales and an increase in store sales, both largely driven by the COVID-19 pandemic. Albertsons reported that its delivery options now reach 90% of its stores, and accelerated expansion of curbside pickup (Drive Up and Go) is on track to reach 1,600 stores.

Since the beginning of fiscal 2020, Albertsons has experienced significant increases in product demand and overall basket size in stores and in its e-commerce business as customers responded to the circumstances around COVID-19. Due to these circumstances, Albertsons said it was unable to predict the continuing impact of COVID-19 on its business for the balance of the year with reasonable certainty. The ongoing pandemic has dramatically changed the landscape of food-at-home consumption and Albertsons continues to prioritize the health and safety of its associates, customers and communities, said the company.

Related:Q&A: Albertsons CEO Vivek Sankaran sees growth phase ahead

"I am inspired by the many ways my colleagues continue to step up to serve our customers and help our communities around the country during this time of need," said Vivek Sankaran, president and CEO, who joined the company in April 2019 and has guided it through consistent strong sales performance since. "Their hard work and dedication have also allowed us to successfully navigate this extraordinary environment and we have accelerated our digital and e-commerce strategy to adapt to market conditions. We generated strong financial performance in the first quarter, including robust cash flow and enhanced liquidity, which support our continued investment to benefit our associates, customers, communities and stockholders."

Net cash provided by operating activities was $2.1 billion during the first quarter of fiscal 2020 compared to $802.7 million during the first quarter of fiscal 2019. The increase in cash flow from operations compared to the first quarter last year was primarily due to improvements in operating performance and changes in working capital primarily related to inventory and accounts payable driven by the increase in sales volume during the first quarter of fiscal 2020.

Related:Albertsons named Supermarket News Retailer of the Year

During the first quarter of fiscal 2020, Albertsons spent approximately $402.3 million in capital expenditures, which included investments in strategic technology and accelerated investment in e-commerce and the completion of 46 remodel projects.

Among Albertsons’ first-quarter highlights:

Albertsons reports that its fresh departments are doing extremely well as customers eat at home more and seek high-quality food.

According to the company, Albertsons has continued to see strong customer demand during the pandemic and expects demand levels to remain elevated as customers continue to eat at home for an extended period. The retailer noted that its loyalty program and Own Brands private label continue to grow, while its fresh departments are doing extremely well as customers eat at home more and seek high-quality food.

Commenting on the success of the loyalty program during an analysts' call on Monday, Sankaran said, "Our rapidly growing loyalty program is a key enabler that will allow us to increase retention of customers. We have expanded our pool of loyal customers, broadening their engagement with us and retaining their business. For example, in Q1 we saw a 27% increase in the number of households that signed up for our loyalty program to 22.5 million driven by the expansion of the program in key geographies. The number of members in our program who redeemed digital deals and coupons was also up 32% year-on-year with the average weekly spend being two times that of customers that are not engaged in the digital deals and coupons."

He added, "Going forward, we are focused on expanding our enrollment in geographies that have historically not had it and working towards strengthening engagement in geographies with high enrollment. Overall, the customer is at the center of everything we do and picking the right priorities we do and picking the right priorities and putting resources and energy behind them will help us deliver value both for our customers and our stockholders."

Sankaran noted that the continuing surge of the coronavirus in many parts of the United States will result in continued demand for grocery, both in-store and online. "With the recent flare-ups of COVID-19 in several parts of the U.S., including states where we have many stores like California and Texas, the magnitude of increases week by week have been closely correlated with the level of consumer concern about the virus. We have continued to see strong customer demand this month and estimate the July ID sales growth will be in the mid-teens," he said.

"Given the current dynamics, we expect demand levels to remain elevated as customers are likely to continue to eat at home for an extended period."

The nation’s second-largest supermarket operator, Albertsons finished fiscal 2019 with 2,252 food and drugstores in 34 states and the District of Columbia under such banners as Albertsons, Safeway, Vons, Pavilions, Randalls, Tom Thumb, Carrs, Jewel-Osco, Acme, Shaw's, Star Market, United Supermarkets, Market Street and Haggen. The company also operates 1,726 pharmacies, 402 fuel centers, 23 distribution centers and 20 manufacturing plants. The retailer was recently named Supermarket News' Retailer of the Year for 2020 and will be featured in the September issue and online.

On June 26, Albertsons made its debut on the New York Stock Exchange after launching an $800 million initial public offering. The event came after two previous attempts in recent years to take the company public — including through the terminated merger deal with Rite Aid in 2018 — but also provided icing on the cake for a strong 2019 fiscal year.

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