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02/28/2022

Albertsons Cos. Launches Strategic Review

Company says it will be "responding to inquiries"
Gina Acosta
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The parent company of Vons and other banners went public in 2020.

Albertsons Cos. has hired Goldman Sachs and Credit Suisse to begin a review of "potential strategic alternatives aimed at enhancing Albertsons’ growth and maximizing shareholder value."

According to an announcement from the grocery chain after the market closed on Feb. 28, the review will include "an assessment of various balance sheet optimization and capital return strategies, potential strategic or financial transactions and development of other strategic initiatives to complement Albertsons’ existing businesses." The company will also be "responding to inquiries," a signal that the company may be entertaining a sale or an acquisition.

"The board believes the continuing strength of our business and the scale of our portfolio of assets warrants a deep and considered review of all possible paths towards maximizing value creation,” said Chan Galbato, co-chair of the board of directors. “Albertsons operates more than 2,270 stores across 34 states with growing digital and omnichannel capabilities, along with a vast dedicated manufacturing and distribution infrastructure, which have become integral to the fabric of communities across the U.S. The board believes that this review, coupled with an ongoing focus on accelerating our transformation strategy, will create enhanced value for all our stakeholders including our customers, associates, and investors.”

The board of directors has not set a timetable for the review, the company said.

Albertsons Cos. went public in 2020 and has increased sales ever since. In January, the grocer said that higher prices and an increase in customer traffic related to vaccines led Albertsons Cos. to report higher than expected sales and profit for the third quarter.

For the third quarter ended Dec. 4, same-store sales increased at Albertsons 5.2%; on a two-year stacked basis comp sales growth was 17.5%. Digital sales increased 9%; on a two-year stacked basis, digital sales growth was 234%. Revenue was $16.7 billion. Net income was $425 million, or 74 cents per Class A common share. Excluding the impact of fuel, gross margin rate was 28.9%, an increase of 10 basis points compared to the third quarter of fiscal 2020.

Albertsons raised its guidance for adjusted earnings and sales growth for the full fiscal year. The grocer is now projecting full-year adjusted earnings per share of $2.90 to $2.95, up from a previous forecast of $2.50 to $2.60. Comps will likely decline by 0.8% to 1.2%, better than the previously projected decline of 2.5% to 3.5%, Albertsons said.

"We are pleased with our third quarter results as we continue to execute against our transformation strategy. A favorable economic backdrop together with the heroic performance of our frontline retail, distribution and manufacturing teams contributed to these better-than-expected results," said Vivek Sankaran, CEO. "Also driving these results was our continued focus on in-store excellence, acceleration of our digital and omnichannel capabilities, and delivery of our productivity initiatives. During the quarter, we continued to gain market share in both units and dollars and saw ongoing improvement in both the in-store and online customer experience."

The company says retail price inflation and incremental sales related to administering COVID-19 vaccines contributed to the 5.2% comp increase.

During the first 40 weeks of fiscal 2021, the company spent $1,216.4 million in capital expenditures, which included investments in digital and technology, the opening of nine new stores and the completion of 146 store remodels.

In November, Albertsons launched a retail media network called Albertsons Media Collective, led by Kristi Argyilan, Albertsons Cos.’ SVP of retail media. It offers partners a digital marketing platform and omnichannel solutions with the core consumer in mind.

“We are thrilled to be able to create a differentiated retail media network that will allow our customers to engage with the food and brands they love,” said Argyilan. “Albertsons Media Collective will further our goal of bringing brands and our customers together by delivering an unrivaled vendor and customer experience and truly reimagining marketing for what’s next.”

Albertson Media Collective, developed in partnership with CitrusAd and Merkle, is focused on providing opportunities to connect brands with their most loyal shoppers by opening up native display and sponsored product inventory throughout the company’s websites. Media opportunities include advertising placements on Albertsons owned properties such as its homepage, department, category, sub-category, email, search, app, pharmacy, as well as on Albertsons’ off-site targeted ad placements.

In February Newsweek named Albertsons' loyalty program as one of the best in the country.

Also in February, Albertsons announced a new delivery service with DoorDash offering consumers faster and more convenient delivery of fresh groceries in less than 30 minutes. As part of the launch, consumers in more than 20 major cities across the United States, including Los Angeles, Denver and Seattle, will be able to receive express grocery delivery from local Albertsons banners such as Safeway, Vons, Acme Markets, Jewel-Osco and Tom Thumb via the DoorDash marketplace. The offering is set to expand to more Albertsons banners in the coming weeks.

Boise, Idaho-based Albertsons operates more than 2,200 retail stores with 1,700-plus pharmacies, 400 associated fuel centers, 22 dedicated distribution centers and 20 manufacturing facilities. It operates stores across 34 states and the District of Columbia under more than 20 well-known banners, among them 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. Albertsons is No. 8 on The PG 100, Progressive Grocer’s 2021 list of the top food and consumables retailers in North America.

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