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Albertsons’ Q3 sees steady sales gains, e-commerce growth

BY David Salazar

Albertsons’ third quarter saw its e-commerce and private-label brands benefiting from recent investments as the company grew sales and lowered its debt load.

The Boise, Idaho-based company on Monday reported results from its fiscal 2018 third quarter, which ended Dec. 1, posting a 1.8% revenue increase to $13.8 billion. Albertsons’ identical sales increased 1.9%, and it posted e-commerce sales growth of 73% as its private-label brand penetration hit a high of 25.2%. The company closed the quarter with adjusted earnings of $649.7 million — a 51% increase Albertsons attributed to identical sales growth and cost reduction, among other efforts.

“We continue to gain traction in our efforts to deliver a seamless shopping experience for our customers in both the four-wall and no-wall environment,” said Jim Donald, Albertsons president and CEO. “The third quarter marked our strongest identical sales increase since the first quarter of fiscal 2016. Identical sales grew for the fourth consecutive quarter, and adjusted EBITDA grew over 50% compared to the same quarter last year, as the business has rebounded from fiscal 2017.”

Albertsons decreased its selling and administrative expenses by 26.6% compared with the prior-year third quarter, which it attributed mostly to lower depreciation and amortization expenses, reduced acquisition and integration costs, and its cost-reduction efforts coming to fruition. Gross profit margin increased to 27.8% for the quarter — up from 26.7% a year ago. Net income was $45.6 million — down from the $218.1 million it reported in fiscal 2017’s third quarter.

Challenges in the quarter that Albertsons identified included high shrink rates in recently converted stores and distribution centers that offset its efforts to improve shrink rates, as well as such industry-wide difficulties as the recall of romaine lettuce, California wildfires and a recent earthquake in Alaska. Despite the challenges, Albertsons said it’s pleased with its results due to the high level of integration efforts and its investment in its digital and e-commerce offers.

For the year to date, Albertsons has seen $46.5 billion in revenue — up 1.4% over the prior-year period. Adjusted earnings have been $2 billion, compared with $1.7 billion in the first 40 weeks of fiscal 2017. The company has seen a net loss of $4.5 million year to date — an improvement over the $342 million net loss it reported in the prior-year period.

Albertsons said that in the first 40 weeks of fiscal 2018, it spent $917 million in capital expenditures, including roughly $45 million toward the Safeway integration, 91 remodels and the opening of three new stores, as well as continued focus on digital marketing development. The company said it has reduced its principal debt balance by $1 billion this year.

For the full year, Albertsons said it projects its EBITDA to be between $2.65 billion and $2.7 billion. It expects to spend $1.4 billion on capital expenditures for the full year, as well as an effective tax rate of between 29% and 30%.

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