Albertsons Q2 Driven By Gains in Digital Sales, Loyalty Members
Albertsons Cos. is making good on the investments it has made in its Customers for Life strategy with digital, pharmacy and loyalty gains in the second quarter, which ended Sept. 7. The grocer also saw a year-over-year increase in net sales and other revenue, which was driven by a 2.5% increase in identical sales.
Albertsons attributes the identical sales increase to its strong growth in pharmacy sales, as well as a 24% increase in digital sales during Q2. The increase in net sales and other revenue, however, was partially offset by lower fuel sales.
Loyalty members increased 15% to 43 million during the quarter, and year-over-year gross margin rate remained unchanged at 27.6%. Excluding the impact of fuel and LIFO expense, gross margin rate decreased 44 basis points year-over-year, which is attributed to strong growth in pharmacy sales, as well as increases in picking and delivery costs related to digital sales growth.
"In the second quarter of fiscal 2024, investments in our Customers for Life strategy continued to drive strong growth in our digital sales and pharmacy operations," said Albertsons CEO Vivek Sankaran. "We also drove strong year-over-year growth in our loyalty members and omnichannel shoppers, and accelerated growth in our Albertsons Media Collective. We want to thank our teams for their ongoing commitment to serving our customers and supporting the communities in which we operate."
According to a new report from Placer.ai, foot traffic at Albertsons was up nearly 11% compared to the pre-pandemic period. While visits to Albertsons banners were down 1.4% during the third quarter of 2024 year-over-year, they were up 10.8% compared to Q3 of 2019.
Meanwhile, net income was $145.5 million, or $0.25 per share, during Q2, compared to $266.9 million, or $0.46 per share, during Q2 of FY23. Also during Q2, adjusted EBITDA was $900.6 million, or 4.9% of net sales and other revenue, compared to $976.9 million, or 5.3% of net sales and other revenue, during Q2 of FY23.
Albertsons also shared that capital expenditures for the first 28 weeks of FY24 were $952.3 million, to include the completion of 44 remodels, the opening of two new stores and continued investment in digital and technology platforms.
"As we look ahead to the balance of fiscal 2024, we expect to see continuing headwinds related to investments in associate wages and benefits, an increasing mix of our pharmacy and digital businesses which carry lower margins, and an increasingly competitive backdrop,” Sankaran said. “We expect these headwinds to be partially offset by ongoing and new productivity initiatives."
Meanwhile, The Kroger Co. rested its case last week in a trial in Washington state that aims to stop the retailer's proposed $24.6 billion merger with Albertsons. Both Kroger and the state can submit final briefings before closing arguments, which are scheduled for Oct. 23.
The Washington case is one of three attempts to block the mega-merger, with Kroger and Albertsons' legal teams also working on a separate trial in Denver. Additionally, Oregon U.S. District Judge Adrienne Nelson is still weighing the case that wrapped up in her court in late September, noting that the deliberation process is moving “as expeditiously as possible.”
As of Sept. 7, Boise, Idaho-based Albertsons operated 2,267 retail stores and drug stores with 1,726 pharmacies, 405 associated fuel centers, 22 dedicated distribution centers and 19 manufacturing facilities. The company has more than 20 banners in 34 states. Albertsons is No. 9 on The PG 100, Progressive Grocer’s 2024 list of top food and consumables retailers in North America. PG also named the company one of its Retailers of the Century.
