Albertsons Inc. reported digital sales growth at nearly 20 times the rate of net sales and other revenue for its fiscal Q3 2024, which ended Nov. 30, 2024.

Net sales and other revenue increased 1.2% year over year for Albertsons in its fiscal Q3. That’s up to $18.77 billion. Identical sales grew 2% in the period, fueling the increase in net sales.

Meanwhile, Albertsons’ gross margin rate was nearly identical year over year. It decreased slightly to 27.9% in Q3 from 28.0% a year prior. Simultaneously, Albertsons selling and administrative expenses increased to 25.1% of net sales and other revenue in Q3. That’s up from 24.8% in the prior-year period.

Albertsons attributed the identical sales growth to “strong growth in pharmacy sales,” which also carry “an overall lower gross margin rate,” the retailer said. Pharmacy sales penetration has surpassed 11% of total annual revenue, CEO Vivek Sankaran told investors on the retailer’s earnings call. It added that it attributed the increase in selling and administrative expenses as a percentage of net sales and other revenue to costs related to the blocked merger with The Kroger Co.

On the earnings call, CEO Vivek Sankaran noted Albertsons’ focus on digital sales during the two years of regulatory limbo regarding the Kroger merger.

Albertsons is No. 19 in the Top 1000 Database. The database ranks North America’s top online retailers by their annual web sales. It owns and operates its namesake store, Albertsons, as well as brands including Carrs, Haggen, Jewel Osco, Lucky, Safeway and more.

Albertsons digital sales in Q3

In its fiscal Q3, Albertsons digital sales grew 23% year over year.

To engage customers, Sankaran explained, Albertsons has invested in growth through digital platforms.

“These platforms are designed to drive increased sales, more deeply engage our most loyal customers, increase customer lifetime value, and generate digital space and robust data for the Albertsons Media Collective,” Sankaran said.

The Albertsons Media Collective is the retailer’s retail media network. It uses a combination of first-party data, in-store sales and other shopper information to give advertisers better ad-targeting abilities.

Among those platforms, Sankaran said, is ecommerce. He said Albertsons runs its ecommerce business out of its stores so its inventory is close to its customers. Albertsons’ investments in ecommerce have driven sales penetration to more than 7% of grocery revenue, he said. Its top-performing market’s digital sales penetration is above 9%, he added.

“This growth, which is higher in our first party versus our third-party business, has been driven by the development of new capabilities in our fully integrated mobile app and improvements in quality, speed, and convenience of DriveUp & Go and in-home delivery,” Sankaran said. “While we have grown this business significantly and faster than the market, it is still under-penetrated compared to industry benchmarks and is one of our biggest growth customer acquisition and customer retention opportunities.”

As far as fulfillment goes, Sankaran said Albertsons expects 30% of its distribution volume to be automated by the end of 2025. It also expects its new warehouse management system to be fully implemented company-wide.

“These supply chain initiatives improve in-stock conditions, differentiate our fresh quality, lower our cost to serve and improve our end-to-end data analytics capabilities,” he said.

How many loyalty members does Albertsons have?

Albertsons ended its fiscal Q3 2024 with 44.3 million loyalty members. That’s a 15% year-over-year increase.

The retailer integrated its loyalty program into its mobile app. Sankaran called it a “key engagement tool” for the retailer.

“It is the entry point for digital and personalized marketing and a primary contributor of data to our retail media collective,” Sankaran said.

In April, Albertsons launched a program that allows its customers to redeem points for dollars off their grocery bills. Since then, Sankaran said, it has seen more frequent engagement, higher retention, and increased customer spend.

Albertsons has integrated its mobile app for use in its physical stores. It launched an in-store geolocated mobile feature that delivers real-time coupons, Sankaran said.

By the end of the retailer’s fiscal 2024, it expects more than 8 million of its customers to have used the in-store feature. It plans to launch more capabilities that would drive deeper engagement over time, Sankaran said, without noting examples.

Albertsons merger with Kroger a no-go

After Albertsons closed out its Q3, a federal judge issued an injunction stopping the deal that would have seen Kroger acquire Albertsons for about $25 billion.

Albertsons would have come out of the merger as a “surviving corporation and a direct, wholly owned subsidiary of Kroger,” it said in an earnings release for its fiscal Q3 2024. It also “exercised its right to terminate the merger agreement,” sending notice on Dec. 10 to Kroger to do so. Following the termination of the merger agreement, it said, it filed a lawsuit against Kroger in Delaware seeking damages in an amount a judge would determine at trial. That would be “in addition to the $600 million termination fee which Kroger is already obligated to pay the company under the merger agreement.”

The next day, Dec. 11, Albertsons said, Kroger delivered a notice to Albertsons alleging that the termination notice was not effective and that Kroger had no obligation to pay the $600 million fee.

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