Albertsons Companies, Inc. Q1 FY2023 earnings call

• Deepening digital connection: Operated 2,075 Drive Up & Go stores, launched new merchandising features in the mobile app, and saw growth in the meal planning tool with over 1.2 million unique visitors. Expanded services and innovation led to 28% digital sales growth.
  • Differentiating store experience: Used technology for task management, simplified the shopping journey by improving assortments and checkouts, and evolved store operations for omnichannel growth with staging areas and new technologies.
  • Enhancing offerings: Own Brands sales penetration was at 25.8% with sales outpacing national brands in several categories; launched 59 new items. Fresh offerings included ready meals rolled out to 600 stores. Modernized supply chain with automation in distribution centers and a new warehouse management system.
  • Embedding ESG: Launched new ESG framework, used electric terminal tractors in distribution centers, and supported hunger relief through food bank donations and a $7.7 billion fundraiser for Nourishing Neighbors Initiative.

In the first quarter, ID sales increased 6.8%. Digital sales grew 28% year-over-year. Omnichannel households rose 34% year-over-year with retention rates over 90% and spending 3x more than in-store-only shoppers. Just for U Loyalty members increased 16% to 31 million, with actively engaged members spending 4x more than non-actively engaged ones. Adjusted EBITDA was $1.42 billion, up 9% year-over-year, and adjusted EPS was $1 per share. ID sales contribution to overall performance was significant, with digital and loyalty programs driving growth.

• Raised fiscal 2022 ID sales outlook to 3%-4% (previously 2%-3%), driven by inflation and market share gains. Adjusted EBITDA is expected to be in the range of $4.25 billion to $4.35 billion (previously $4.15 billion to $4.25 billion). Adjusted EPS is now projected to be $2.80 to $2.95 per fully diluted share (previously $2.70 to $2.85). Capital expenditures are expected to remain in the range of $2 billion to $2.1 billion.
  • Q2 ID sales are expected to be above the full-year range, with the back half below due to cycling heightened inflation from the back half of fiscal 2021.

• Uncertainty from the macro environment and potential implications on consumer behavior. Continued supply chain disruptions and transportation challenges. Possible changes in consumer trading down or up behavior, which could impact sales and margins.

Q: How much of the 6.8% ID sales was due to passing through higher prices to consumers?

A: Sharon McCollam stated that retail CPI was high for the quarter, and while inflation helped drive the ID sales, there were also offsets like unit breakage and reduced government stimulus.

Q: Are you seeing changes in the competitive promotional backdrop?

A: Vivek Sankaran said they're not seeing a material change, but promotions are more targeted and personalized using technology, and supply chain improvements are throttling promotional intensity.

Q: Why is the current operating environment challenging?

A: Vivek Sankaran mentioned uncertainty as a key challenge, along with ongoing supply chain disruptions and the need to be local and nimble to navigate changes.