The grocery business—and the rest of the U.S. economy—is radically different than it was at the end of Albertsons Cos. Inc.’s 2019 fiscal year on Feb. 29. And the retailer’s latest earnings statement reflects that.
“We are pleased that our momentum continued as we closed fiscal 2019, with improved performance on the top and bottom line,” says Vivek Sankaran, president and CEO, in the statement, which was released Thursday. “However, the world has changed since then, and we are heavily focused on supporting our associates, our customers and the communities we serve as we respond to the increased demand resulting from the COVID-19 pandemic.”
During a conference call with analysts that same day, Albertsons said ecommerce sales for the eight weeks ending April 25 grew 243%, compared with the comparable period last year. In March, the year-over-year increase in online sales was 109%; in April, the gain was 374%.
For the same eight weeks, quarter-to-date identical sales (online and offline) increased 34% compared with the comparable period during fiscal 2019. That includes a 47% surge during the first four weeks of fiscal 2020, which ended March 28, and a 21% increase for the four weeks ended April 25.
New workers and a cash cushion
Albertsons (No. 74 in the 2020 Digital Commerce 360 Top 1000) says it has hired more than 55,000 new associates since March 1. To recruit those workers in a short time, the retailer worked with more than 35 companies that had furloughed employees during the pandemic. That hiring includes additional in-store pickers and drivers to accommodate orders placed online for curbside pickup or delivery. An Albertsons spokeswoman says the company does not break out hiring totals by job function.
Albertsons says it also simplified its ecommerce offerings to focus on the products that are most in-demand and implemented “contact-free” protocols for its home delivery and Drive Up and Go curbside service. The spokeswoman declined to discuss further details, except to say the retailer has “taken steps to enhance efficiency.”
Also, in March, Albertsons drew down $2 billion on its $4 billion asset-based revolving credit facility, the retailer announced. Albertsons says it does not anticipate using the cash, but the move was a “precautionary measure” to increase its cash position in light of the uncertainty caused by COVID-19.
Albertsons is not alone
Whatever grocery retailers had in mind for 2020, the COVID-19 pandemic is upending those plans—domestically and elsewhere. For example, Sainsbury Plc, the United Kingdom’s second-largest grocery chain, reported this week the pandemic would disrupt business until September, and then the economic fallout will set in.
Costs will rise by 500 million pounds ($625 million) this year because of safety measures and lower fuel sales. That will be offset by 450 million pounds ($562.4 million) of property tax relief from the government, meaning pretax profit will probably remain unchanged this year, the retailer said. Sainsbury based its estimates on the premise that lockdown restrictions ease by the end of June. It has faced enormous demand from consumers stockpiling goods, but costs have risen too.
Sainsbury says it is prioritizing elderly, disabled and other vulnerable people for online grocery times in its home delivery and at-store pickup operations. It also increased the total number of slots available weekly by nearly 50%.
In the U.S., Walmart Inc. (No. 3 in the Top 1000) announced on April 17 that it met a previously announced goal to hire 150,000 additional employees in response to the pandemic and planned to hire another 50,000 workers across its stores, warehouse clubs, fulfillment operations and distribution centers. To recruit those workers, Walmart says it worked with more than 70 companies that have furloughed workers. Walmart had hired about 85% of those new employees for temporary or part-time roles.
Amazon.com Inc. (No. 1) says it is dealing with an “unprecedented demand for grocery delivery” by hiring new workers, expanding the availability of grocery delivery and putting new online grocery customers on waiting lists.
In an April 12 blog post, Stephenie Landry, vice president of grocery at Amazon wrote that increased safety protocols at Amazon’s Whole Foods Markets and other facilities have “created limits in our ability to increase the capacity of our delivery services.” Despite that, the ecommerce giant has added grocery pickup from roughly 80 stores to more than 150 and also plans to expand grocery pickup at Whole Foods.
Albertsons’ 2019 results
Even before the pandemic hit and states and local governments issued stay-at-home directives, Albertsons was seeing fast growth in its online business.
For the fourth quarter ended Feb. 29, Albertsons reported:
- Digital sales growth of 32% compared with the same quarter a year earlier. Albertsons did not break out the dollar amount.
- Net revenue (online and offline) was $15.437 billion, up 10.1% from $14.017 billion for the same quarter a year earlier. The increase in sales was primarily driven by the extra week in the fourth quarter of fiscal 2019, which contributed about $1.1 billion.
- Net income of $67.8 million, down 50% from $135.6 million for the 2018 fourth quarter.
- A 26% rise in Albertsons’ Just for U rewards program and a 37% increase in digital coupon redemptions.
- Identical sales grew 1.8% in which was partially offset by a reduction in sales related to store closures.
For the year ended Feb. 29, Albertsons reported:
- Digital sales growth of 39% compared with fiscal 2018.
- Net revenue (online and offline) of $62.455 billion, up $3.2% from $60.535 billion.
- Net income was $466.4 million, up 255.7% from $131.1 million in fiscal 2018. The company mentioned several factors that increased it profitability in 2019, including an improved product mix, increased penetration of its private-label products and lower interest expenses, primarily attributable to lower average outstanding borrowings compared to fiscal 2018.
- Identical sales grew by 2.1%.
Albertsons operates stores in 34 states and the District of Columbia under 20 banner names, including Albertsons, Safeway, Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen and Carrs.
The retailer, owned since 2006 by private equity firm Cerberus Capital Management, filed a registration statement for a proposed initial public offering on March 6 with the U.S. Securities and Exchange Commission. The amount of securities offered will be determined by market conditions and other factors at the time of the offering. The number of shares of stock to be offered and the price range for the offering have not yet been determined.
Bloomberg News contributed to this report.