Albertsons' “omnichannel strategy is working” and its “adding customers” to the franchise, said CEO Vivek Sankaran.
The food and drug retailer spent around $823 million year to date investing in its digital and technology platforms, completing 76 remodels and opening seven stores. For the year, Albertsons Cos. expects capital spending in the range of approximately $1.9-$2 billion.
Customers are “spending more with us and engaging in more ways with us,” Sankaran said on the company’s Q2 2021 earnings call. “We continue to gain market share in dollars and units, and our trends improved with each successive period in the quarter, and especially around holidays. Our digital initiatives continue to drive engagement and growth.”
Sharon McCollam, who joined Albertsons in September as its president and CFO, noted “these investments create gradual and incremental returns over time,” and start with having to build the foundations.
“Where the company is now is very much on getting out of systems that are old enough to drink and vote in most states and actually putting in platforms that they can build on quickly.”
This is a story you hear from every large retailer who has legacy systems, she said, noting that Albertsons has been working on this for the last 18-24 months and one of the key steps has been getting into the Cloud.
“As you know, that is a significant undertaking, and the company is making great progress on that. We still have a ways to go, but we are making very good progress in that space, thus being able to move much faster in the future.”
Second Quarter of Fiscal 2021 Highlights
- Identical sales increased 1.5%; on a two-year stacked basis identical sales growth was 15.3%
- Digital sales increased 5%; on a two-year stacked basis digital sales growth was 248%
- Net income of $295 million; Adjusted net income of $370 million
- Increased quarterly common stock dividend by 20% to $0.12 per share
- Gross profit margin decreased to 28.6% during the second quarter of fiscal 2021 compared to 29.0% during the second quarter of fiscal 2020.
- Sales and other revenue was $16.5 billion during Q2 2021
Albertsons has also made omnichannel progress with its Drive Up & Go and home delivery capabilities, which have increased omnichannel households by over four times versus Q2 2019, according to Sankaran who also noted omnichannel customers spend three times more than in-store-only shoppers. Albertsons has expanded its Drive Up & Go locations to over 1,900 and expects to reach approximately 2,000 locations by the end of the year. The average wait time for pickup is now down to three minutes, Sankaran said, and the company continues to speed up delivery times, while reducing delivery cost per order by expanding its third-party delivery store network. The retailer also has plans to add four additional micro fulfillment centers before the end of its fiscal year, bringing the total to seven.
“Digital transformation is an imperative in our growth strategy, as we aim to provide an array of convenient shopping experience for our customers,” Sankaran noted.
Digital sales for the retailer increased 5% in the quarter; on a two-year stacked basis digital sales growth was 248%.
"We are pleased with our second quarter results as we continue to execute our transformation strategy,” Sankaran said in a press release. “The favorable consumer backdrop together with our focus on in-store excellence, accelerating our digital and omni-channel capabilities, increasing productivity and strengthening our talent and culture, are driving increased identical sales and improved performance.”
Based on this performance, the company announced a 20% increase to its quarterly dividend and raised its fiscal year 2021 outlook.