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10/22/2017

Albertsons cooks up a digital transformation

Gina Acosta
Executive Editor
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The CEO of Albertsons Companies says its efforts to focus on the omnichannel grocery experience are bearing fruit, as the grocery chain posted a spike in e-commerce revenue in the second quarter.

For the second quarter ended Sept. 9, the retailer says it grew its e-commerce business by 19% year over year. The company says it's planning to double the number of stores that offer click and collect by the end of fiscal 2017. And the retailer says it is planning to upgrade its app for delivery and pickup to make the digital experience better for shoppers.

"We remain focused on our customers' needs by providing full, fresh, friendly and clean stores and have accelerated the expansion of our eCommerce and digital offerings," said Bob Miller, Chairman and CEO. "With the expansion of home delivery and click-and-collect, together with the acquisition of Plated, we are making progress in serving our customers wherever, whenever and however they want to purchase food. Our identical store sales continued to improve sequentially over the last two quarters, as deflationary pressures have lessened and our merchandising plans were tailored to meet our customers' needs. In addition, we continue to add innovative products to our Own Brands portfolio as we increase penetration."

During the second quarter, net sales and other revenue decreased 0.2% to $13,831.7 million from $13,856.1 million. The decrease in net sales and other revenue was primarily driven by a decrease in sales of $227.8 million from the company's 1.8% decline in same store sales, partially offset by sales of $125.7 million from new and acquired stores, net of sales related to store closings, and an increase in fuel sales of $73.5 million.

During the second quarter, the company says same store sales were impacted by a lack of food price inflation and making selective investments in price to increase sales.

"With our growing home delivery business, our popular click and collect offering and our acquisition of Plated, we are positioning ourselves to meets customers' changing needs and desires," said Wayne Denningham, EVP & Chief Operating Officer, in an earnings call with analysts. "Not only do we expect Plated to keep growing sales, but this acquisition will accelerate the implementation and sales of meal kits in-store. We plan to expand that business into our stores."

Gross profit margin at Albertsons decreased to 27% for the second quarter of fiscal 2017 compared to 27.2% for the second quarter of fiscal 2016. Excluding the impact of fuel, gross profit margin decreased 10 basis points. The decrease is primarily attributable to selective investments in price and an increase in shrink expense as a percentage of sales.

For the full year, net sales and other revenue increased 0.1% to $32,291.7 million for the first 28 weeks of fiscal 2017 from $32,247.8 million for the first 28 weeks of fiscal 2016. Same store sales for the first 28 weeks of fiscal 2017 declined 2% compared to an increase of 1.7% for the first 28 weeks of fiscal 2016.

On Sept. 20, subsequent to the end of the second quarter of fiscal 2017, the company acquired DineInFresh, Inc. ("Plated"). The acquisition consideration was comprised of $125 million in initial cash consideration, $50 million in deferred cash consideration to be paid over the next three years, and an earn-out of up to a maximum of $125 million, in cash or equity of the company's parent, over the next three years, collectively, if the business achieves specified performance targets.

As of Sept. 9, the company operated 2,328 retail food and drug stores with 1,779 pharmacies, 393 associated fuel centers, 27 dedicated distribution centers and 18 manufacturing facilities.