While Albertsons Cos.’s digital business has posted substantial growth numbers, the retailer hasn’t lost sight of more traditional drivers of sales that are enhanced by digital. In a move to keep its physical footprint fresh, the Boise, Idaho-based company opened nine new stores last year, closed 10 others, and executed 409 store upgrade and remodeling projects as part of a $1.63 billion capital expenditure program.
In addition, opportunistic acquisitions remain a key element of Albertsons’ growth strategy. For example, on Jan. 23, about a month before the end of its fiscal year, Albertsons paid $98.1 million to acquire 27 Kings Food Markets and Balducci’s Food Lovers Market stores, which were in bankruptcy proceedings. Located in five Northeastern states, predominantly New Jersey, the acquired stores were rolled into Albertsons’ Mid-Atlantic division, which includes the Acme and Safeway banners.
Albertsons could potentially make larger acquisitions in the future, as its level of indebtedness, while still substantial, has improved. The company had approximately $7.8 billion of debt outstanding, other than finance lease obligations, at the end of the last fiscal year, and had the ability to borrow $3.6 billion, according to disclosures made to investors. Albertsons CFO Bob Dimond also said that the company “generate[d] very robust operating free cash flow of $2.3 billion in fiscal 2020.”
Additional acquisitions could help Albertsons bolster market densities in areas where it’s underpenetrated, thus improving expense leverage and its competitive position. While the timing and likelihood of any such deals are unknown, the company is clear that it plans to increase capital investments to keep existing stores fresh.
Albertsons said that it expects to spend as much as $2 billion this year on projects such as store remodels and the acceleration of digital and technology investments. It hasn’t disclosed whether it plans to open any stores this year, and if so, how many.
In addition, the company’s improved financial situation means that it was able to recently institute a 10-cent-per-share quarterly dividend payment, and even managed to spend $119 million last year buying back stock.