Identical sales up 4.9%; digital sales rise 22%
BOISE, Idaho – Albertsons Cos. reported revenue of $24.1 billion during the 16 weeks ended June 17, 2023, up from $23.3 billion during the year-earlier period, with the increase driven by factors including a 4.9% increase in identical sales, retail price inflation across most categories, growth in pharmacy and increasing digital penetration.
Albertsons said digital sales increased 22% in its fiscal first quarter. At quarter’s end, the supermarket retailer had 35.9 million loyalty members, up 16% from the comparable period a year earlier.
“Our first-quarter results demonstrate the resilience of our business, and the effectiveness of our Customers for Life transformation strategy, even as the economic environment has become more challenging,” Vivek Sankaran, chief executive officer at Albertsons, said in a press release.
Added Sankaran, “As we look ahead to the balance of the year, we remain focused on driving operational excellence in our stores and continued growth in our digital and pharmacy operations. We will also continue to drive the initiatives supporting our Customers for Life strategy, including delivering on our customer promises, deepening our relationships with them, and serving them where, when and how they want to be served.
“We are also mindful of the evolving economic backdrop, including slowing food inflation, declining government assistance and higher interest rates, and their potential effects on consumer spending and our business. We also expect to see ongoing labor investment, broad inflationary cost increases and significant declines in COVID-19 vaccination and test kit revenue. These headwinds, however, are expected to be partially offset by the benefits of our productivity initiatives.”
Albertsons said its gross margin rate declined 27.7% during the first quarter compared to 28.1% during the first quarter of fiscal 2022.
Excluding the impact of fuel and LIFO expense, gross margin rate decreased 91 basis points compared to the first quarter of fiscal 2022. Pharmacy operations drove almost half of the rate decrease with the remaining decrease being the result of increases in shrink, picking and delivery costs related to the continued growth in digital sales, and warehouse costs. The rate decrease related to pharmacy operations was primarily due to growth in pharmacy sales and fewer COVID-19 vaccines in the first quarter of fiscal 2023.
Productivity gains permit incremental price investments
The company said benefits from its productivity initiatives allowed it to provide incremental price investments to customers.
Adjusted net income was $545.7 million, or $0.93 per share, during the first quarter of fiscal 2023 compared to $582 million, or $1.00 per share, in the year-earlier period.
Capital expenditures in the first quarter were $622.5 million, which primarily included the completion of 43 remodels, the opening of two new stores and continued investment in technology platforms.
Albertsons didn’t provide a profit and sales forecast for fiscal 2023.
The earnings release cited The Kroger Cos.’ pending buyout of the company, a merger that would create a larger, more efficient competitor to non-traditional grocers Walmart and Amazon. The companies have said they expect the deal to close in early 2024 if it’s approved by the Federal Trade Commission and the Department of Justice and survives any court challenges. The retailers project that a Kroger-Albertsons combination would produce about $1 billion of annual cost savings within four years of the deal closing.