With pandemic-related results now cycled, Albertsons Cos. saw a return to growth in its first quarter of fiscal 2022 with strong net same sales gains.
For the 16 weeks ended June 18, net sales and other income were $23.31 billion, up 9.6% from $21.27 billion a year earlier, when the figure revenue fell 6.5% year-over-year, Albertsons said on Tuesday. The Boise, Idaho-based grocer attributed the rise in sales to high identical (ID) sales and higher fuel sales, noting that retail price inflation boosted ID sales.
Identical (ID) sales rose 6.8% in the first quarter of 2022, rebounding from a 10% decline a year ago. Likewise, digital sales jumped 28% after flat results in the 2021 quarter, when online sales grew 276% on a two-year stack.
“This puts us in a strong position to continue executing our ‘Customers for Life’ strategy.” — Vivek Sankaran, CEO of Albertsons Cos. (photo courtesy of Albertsons)
“In the first quarter, our teams continued to deliver strong operational and financial performance across all key metrics, and we continued to gain market share,” said Albertsons Cos CEO. Vivek Sankaran in a statement. “As we look forward to the remainder of the year, as we reflect on the macroeconomic environment and possible implications on consumer behavior, our teams have consistently demonstrated their ability to adapt to a changing environment over time. This puts us in a strong position to continue executing our “Customers for Life” strategy, including engaging our customers more deeply both digitally and in-store and delivering on our productivity agenda. the resilience, agility and passion of our teams and their continued service to our customers and communities.
Also on Tuesday, Albertsons provided an update on the company’s “strategic alternatives review” announced in late February. The retailer said it hired a third party to appraise its real estate portfolio, and the appraisal pegged the value of its owned and leased properties at $13.7 billion, up from $11.2 billion in 2019.
Albertsons also reported that it had extended a lock-up agreement with five of its major shareholders (Cerberus Capital Management LP, Kimco Realty Corp., Klaff Realty LP, Lubert-Adler Partners and Jubilee Limited Partnership) until September 10, as the pact was due to expire on June 30. Under the agreement, each sponsor has agreed to restrictions on its ability to offer, sell, transfer, contract to sell, pledge or assign common stock of Albertsons Cos. during this period, which extends through the end of the Company’s second fiscal quarter 2022. Together, the five sponsors own approximately 366.04 million common shares, or approximately 69%, of Albertsons’ approximately 531.59 million shares outstanding.
No timeline has been set by the Albertsons board for the strategic review. When announcing the action in February, the company said it had retained Goldman Sachs and Credit Suisse as financial advisers for the review, which will assess balance sheet optimization and capital return strategies, potential strategic or financial transactions and the development of other strategic initiatives to complement Albertsons’ existing businesses. The retailer said the review will also involve “responding to inquiries”.
In her report on Albertsons’ 2021 fiscal year in April, chairman and chief financial officer Sharon McCollam told analysts the company believed it was undervalued relative to its competitors.
“It was really triggered by the fact that the valuation relative to our peers didn’t reflect the strength of our performance, and we had reasons for that,” McCollam said on a conference call at the time. “We outperformed Kroger in the fourth quarter, we outperformed them on the year, etc. So that was really, originally, the catalyst for us,” she explained. “And of course there was the preferred stock overhang that hit the market and then the IPO crash that was coming.”
In net income for the first quarter of fiscal 2022, Albertsons recorded net income of $484.2 million, or 84 cents per diluted Class A common share, compared to $444.8 million, or 78 cents per share Diluted Class A Common Equity, one year ago. Adjusted net income totaled $582 million, or $1.00 per diluted Class A common share, compared to $517.5 million, or 89 cents per diluted Class A common share, in the 2021 quarter.
Analysts, on average, had forecast Albertsons’ first-quarter 2022 adjusted earnings per share at 92 cents, with estimates ranging from 79 cents to $1.11, according to Refinitiv.
Looking ahead, Albertsons has raised its earnings and sales guidance for fiscal 2022. The company now expects adjusted net EPS (Class A common stock) of $2.80 to $2.95, up from compared to the previous estimate of $2.70 to $2.85. Wall Street’s consensus adjusted EPS estimate for fiscal year 2022 is $2.85, with projections ranging from $2.35 to $3.16, according to Refinitiv.
Albertsons estimates that identification sales will grow 3% to 4% for fiscal 2022, up from its earlier forecast of a 2% to 3% increase. Capital expenditures remain in the $2 billion to $2.1 billion range.
In the first quarter of 2022, Albertsons’ capital expenditures totaled $613.8 million, primarily driven by investments in digital and technology platforms and store upgrades, including 27 renovations.
At the end of the quarter, Albertsons Cos. operated 2,273 grocery and pharmacy stores in 34 states and the District of Columbia under banners such as Albertsons, Safeway, Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets and Balducci’s Food Lovers Market. The retailer’s operations also include 1,720 pharmacies, 402 gas stations, 22 distribution centers and 19 manufacturing plants.