Albertsons Logs Strong Q3 ID Sales as Biz Rebounds

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Albertsons Logs Strong Q3 ID Sales as Biz Rebounds

01/15/2019
Albertsons Logs Strong Q3 ID Sales as Biz Rebounds
Albertsons President and CEO Jim Donald is pleased by the company's financial strides

Thing are continuing to look up at Albertsons Cos. Inc. For its third quarter of fiscal 2018, which ended Dec. 1, 2018, the grocer reported a solid 1.9 percent identical-sales increase – the fourth quarter in a row that it's logged higher ID sales – an adjusted EBITDA increase of more than 50 percent, 73 percent ecommerce sales growth, and the rise of its Own Brands sales penetration to an all-time high of 25.2 percent.

“We continue to gain traction in our efforts to deliver a seamless shopping experience for our customers in both the four-wall and no-wall environment,” said Albertsons President and CEO Jim Donald. “The third quarter marked our strongest identical-sales increase since the first quarter of fiscal 2016. Identical sales grew for the fourth consecutive quarter, and adjusted EBITDA grew over 50 percent compared to the same quarter last year, as the business has rebounded from fiscal 2017. We achieved a record-high sales penetration rate on our Own Brands products as we continue to delight our customers with our portfolio of award-winning brands.”

Albertsons’ sales and other revenue rose 1.8 percent to $13.8 billion during the 12-week third quarter of fiscal 2018, compared with $13.6 billion during the year-ago period, driven by the company’s 1.9 percent increase in identical sales and higher fuel sales of $91.7 million, although partly offset by lower sales in relation to the stores closed in the first three quarters of fiscal 2018.

Gross profit margin grew to 27.8 percent during the third quarter of fiscal 2018 versus 26.7 percent last year. Excluding the effect of fuel, gross profit margin rose 140 basis points, which Albertsons attributed mainly to improved shrink expense as a percentage of sales, lower advertising costs, improved Own Brands penetration and the realization of the company's cost-reduction initiatives.

Net income was $45.6 million during the third quarter of fiscal 2018, compared with $218.1 million during year-ago period, while adjusted EBITDA was $649.7 million, or 4.7 percent of sales, during the third quarter of fiscal 2018, up from $429.0 million, or 3.2 percent of sales, last year. According to Albertsons, the 51.4 percent increase in adjusted EBITDA primarily reflected the company’s identical-sales performance, higher gross profit and successful cost-cutting measures.

Year-to-Date Results

For the first 40 weeks of fiscal 2018, sales and other revenue edged up 1.4 percent to $46.5 billion, compared with $45.9 billion for the first 40 weeks of fiscal 2017. This sales increase was primarily due to Albertsons’ 0.9 percent identical-sales rise and $386.1 million fuel sales increase, partly offset by a reduction in sales related to the stores closed in the first three quarters of fiscal 2018.

Gross profit margin rose to 27.6 percent during the first 40 weeks of fiscal 2018, versus 27 percent during the same period last year. Excluding the impact of fuel, gross profit margin increased 80 basis points, according to the company.

Net loss was $4.5 million during the first 40 weeks of fiscal 2018, compared with $342.0 million during the year-ago period, while adjusted EBITDA was $2.0 billion, or 4.3 percent of sales, during the first 40 weeks of fiscal 2018, versus $1.7 billion, or 3.7 percent of sales, last year.

Also during the first 40 weeks of fiscal 2018, Albertsons invested about $917 million in capital expenditures, including around $45 million related to the Safeway integration, the completion of 91 renovations, three new store openings and ongoing investment in digital marketing capabilities.

Despite its recent business gains, noting that its Q3 results were affected by the romaine lettuce advisory, California fires and Alaska earthquake, as well as its recent sale and leaseback of five distribution centers, along with two earlier in fiscal 2018, Albertsons has updated its full fiscal 2018 identical-sales guidance to a range of 0.8 percent to 1.0 percent, as well as revising its fiscal 2018 adjusted EBITDA to a range of $2.65 billion to $2.7 billion. The company also expects to spend around $1.4 billion in cap ex. 

In other Albertsons news, as it seeks to right-size its business, the grocer is closing four underperforming Massachusetts and New Hampshire Shaw’s stores. The affected locations are in Leominster, Lynn and Plymouth, Mass., and Portsmouth, N.H., according to local press reports.

As the venerable West Bridgewater, Mass.-based chain noted in its statement regarding the closure of the Lynn supermarket, “While the decision to close a store is always difficult — given the impact on employees and customers — it was made only after careful evaluation and was guided by what is best for the company’s ongoing success and future growth.” 

Albertsons operates 2,277 retail food and drug stores with 1,743 pharmacies, 395 associated fuel centers, 23 dedicated distribution centers, five Plated fulfillment centers and 20 manufacturing facilities. The company’s stores mainly operate under the following banners: Albertsons, Safeway, Vons, Pavilions, Randalls, Tom Thumb, Carrs, Sav-On, Jewel-Osco, Acme, Shaw’s, Star Market, United Supermarkets, Market Street, Amigos, Haggen and United Express. Albertsons is No. 3 on Progressive Grocer’s 2018 Super 50 list of the top grocers in the United States.