Albertsons is spinning a lot of plates while the going is good. The question is what it will focus on when things get less easy.
The grocer, which also owns the Jewel-Osco and Safeway chains, exceeded analyst sales expectations for a second consecutive quarter, with identical-store sales increasing by 12.3% from a year earlier in the quarter ended Dec. 5. That exceeded the growth rate of
for the comparable period and was roughly 2 percentage points better than the broad industry, according to Evercore ISI.
Net income for the quarter came in almost 40% below Wall Street estimates, though that number looks much worse due to a charge to withdraw from a union pension fund. Excluding that impact, net income blew past expectations.
The grocery chain’s traditional focus on fresh products is continuing to pay off, with sales growth in that category higher than the total. That turns out to be an important advantage. As consumers across the board are making fewer shopping trips, those that pick up fresh produce tend to drop by stores more frequently, Albertsons noted in its Tuesday morning earnings call.
In other areas, Albertsons is still playing catch up. Digital sales continued to impress, growing 225% from a year earlier. It was the third consecutive quarter in which digital sales increased by more than 200%, though the caveat is that Albertsons’ started out with a smaller e-commerce base than some of its competitors.
And while Albertsons is eyeing the ready-to-eat and ready-to-heat categories, the effort is still on a more experimental scale. It has introduced refrigerated units for these categories in just three markets. “It’s not at any scale we’re proud of,” as the company’s chief executive,
noted during the call.
If the grocery chain really wants to capitalize on meals, it should probably do so rapidly, while consumers are still sticking to work-from-home arrangements. Its competitor Kroger bought meal-kit company Home Chef in 2018.
Meanwhile, the company has no shortage of initiatives to improve the bottom line, including introducing more private-label categories and working on supply chain relationships to reduce costs. The good news is that it is doing so with a discerning eye: For example, it has pulled back from using its own labor for delivery in some markets where it doesn’t pay off—relying instead on third-party providers such as
Albertsons certainly isn’t resting on its laurels, but windfall quarters will eventually end. Its next crucial task will be figuring out which of its many ambitious plans to focus on.
Will the coronavirus pandemic lead to long-term changes in how we shop for food? To better understand the challenges facing grocery stores, WSJ’s Alexander Hotz spoke with an industry insider, a store owner and a Walmart executive.
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