Digital sales increased 9% at Albertsons in the third quarter; on a two-year stacked basis, digital sales growth was 234%.
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 on Jan. 11.
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.
The increase in gross margin rate was primarily due to productivity initiatives, improved pharmacy margins related to administering COVID-19 vaccines and favorable product mix, largely offset by lower gross margin rates across certain product categories due to the rate impact of increased product costs driven by the current inflationary environment, as well as higher supply chain costs.
Selling and administrative expenses at Albertsons decreased to 25.4% of net sales and other revenue during the third quarter. The decrease in selling and administrative expenses was primarily attributable to lower COVID-19 related expenses and the execution of productivity initiatives, which were offset by higher employee costs, depreciation and other expenses related to the company's investments in its digital and omnichannel capabilities and other strategic priorities. The increase in employee costs was the result of additional labor to support the increase in fresh sales, market-driven wage rate increases and higher equity-based compensation expense.
Adjusted EBITDA was $1,051.2 million, or 6.3% of sales, during the third quarter of fiscal 2021 compared to $967.7 million, or 6.3% of sales, during the third quarter of fiscal 2020.
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.
Brand campaigns will begin Feb. 27 and allow partners to access some of the most valuable positions across Albertsons Cos.’ websites and apps, tapping into over 100 million shoppers across the country, including more than 2,200 store locations and over 27 million members of the company’s Just for U loyalty program.
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.