Net income soared despite coronavirus-related expenses of about $615 million, including more than $275 million in extra pay for frontline workers and $53 million for hunger relief efforts.

Grocery chain operator Albertsons Cos. Inc., in its first quarterly statement since its initial public offering last month, reported first quarter online sales grew 276.0% during the 16 weeks ended June 20 compared with the first quarter of 2019. 

The retailer’s 26.5% increase in identical-store sales drove the boost in overall sales, Albertsons says. However, a reduction in revenue related to store closures and lower fuel sales partially offset identical sales. The identical sales benefited from the 276.0% growth in digital sales and boosted in-store sales, both primarily driven by the COVID-19 pandemic, the retailer reported. Albertsons did not break out the digital sales number.

The expansion of curbside service drove the ecommerce growth, said Vivek Sankaran, Albertsons’ president and CEO, in a July 27 conference call with analysts. Albertsons now offers the service at 731 stores, up from 600 at the beginning of the fiscal year, Sankaran said, according to a Thomson StreetEvents transcript on Yahoo Finance.

“We also now have our own delivery offerings in nearly 65% of our stores as well as third-party delivery, which, in total, covers over 90% of our stores,” Sankaran said during the call. Besides operating fulfillment itself, Albertsons also works with  app-based delivery services including DoorDash, Instacart and Postmates..

Albertsons (No. 74  in the 2020 Digital Commerce 360 Top 1000) sees “significant growth potential” in ecommerce and plans to add curbside pickup to nearly 1,400 stores by the end of this fiscal year and 1,600-plus stores within 2 years, Sankaran said.  In total, Albertsons operates 2,252 stores.

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“While the trend towards omnichannel is already occurring, the pandemic has dramatically accelerated this trend. And we have positioned ourselves to support our customers with the solutions they want and need right now,” Sankaran said.

While the pandemic boosted sales, it also increased costs. Albertsons says it spent about $615.0 million on COVID-19-related expenses, including more than $275 million in “appreciation pay” for frontline store workers and $53.0 million for hunger relief in communities it serves.

The retailer reported its gross profit margin increased to 29.8% during the first quarter of fiscal 2020 compared with 28.0% during the first quarter of fiscal 2019. Albertsons says the gross profit margin benefited from a reduction in “shrink expense” as a percentage of sales compared with a year ago and lower promotional activity during most of the first quarter of fiscal 2020. Inventory shrinkage occurs when a retailer has fewer in-stock items than indicated by its inventory list due to clerical errors or goods being damaged, lost or stolen.

For the quarter ended June 20, Albertsons reported:

  • Net income of $586.2 million during the first quarter of fiscal 2020, up 1096.3% compared with net income of $49.0 million during the first quarter of fiscal 2019.
  • Revenue of $22.75 billion, up 21.4% compared with $18.74 billion for the 2019 quarter.
  • The cost of sales grew to $15.98 billion, up 18.4% from $13.50 billion for the 2019 quarter.
  • Selling and administrative expenses decreased to 25.4% of sales during the first quarter of fiscal 2020 compared with 26.4% of sales for the first quarter of fiscal 2019.

Since the beginning of fiscal 2020, Albertsons experienced significant increases in product demand and overall basket size in stores and online as customers responded to the circumstances around COVID-19, the retailer reported. Due to these circumstances, the retailer declined to provide guidance on the continuing impact of COVID-19 on its business for the balance of the year.

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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.

Percentage changes may not align exactly with dollar figures due to rounding.

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