Albertsons sees sales increase, says inflation is a factor and omicron is hurting supply chain recovery

Albertsons on State Street
Posted at 5:02 PM, Jan 11, 2022
and last updated 2022-01-11 19:02:26-05

This article was originally published by Don Day in BoiseDev.

Boise-based Albertsons Companies saw sales and revenue increase in its latest quarter – but sounded a warning on the impact of the omicron variant on supply chains.

The grocery giant said net sales and other revenue hit $16.7 billion during its third quarter, up from $14.1 billion. The quarter ended on December 4th of 2021.

Albertsons said it saw so-called identical store sales rise 5.2% – a measure of how stores open at least a year are performing. The company said inflation helped its revenue – as well as increased fuel sales and revenue from administering COVID-19 vaccines.

Inflation in the mix

The company said while inflation has helped on the sales side, it hurt the company’s margin – and warned that if a period of deflation followed, it would hurt sales and earnings.

“The cost increases are real,” Albertsons CEO Vivek Sankaran said during an investor call Tuesday. “We are seeing it in our supply base. They are seeing it in ingredients, packaging, transportation, labor, and we are seeing it in our own business.”

He said Albertsons isn’t passing all of its increased costs from inflation on to customers.

“We are judicious about the categories where we pass it through. We don’t pass it through on the essential categories where customers have need every day, and we try to balance that out.”

He said he hopes to see stabilization in inflation in the first half the year, and a return to normal in the second half.

Sankaran said that the overall results were “strong,” and said the company was raising its financial outlook for the full year.

“We are pleased with our third-quarter results as we continue to execute against our transformation strategy,” Sankaran said. “A favorable economic backdrop together with the heroic performance of our frontline retail, distribution, and manufacturing teams contributed to these better-than-expected results.”

Despite the increases in sales and increased outlook, the company’s stock saw declines throughout the day.

Omicron again boosts at-home eating, complicates supply chain

In the first weeks of the current quarter that’s underway, Sankaran said there are positive trends for revenue, driven in part by the omicron variant of COVID-19.

“With omicron, you are seeing people eating at home again, so trends (for Albertsons) remain very positive,” Sankaran said.

But, the company says the variant is slowing progress on fixing supply chain issues that have grown visible in stores.

“We have had sustained out-of-stocks in several categories,” he said. “We’ve learned how to manage it and make sure stores are still very presentable and give the consumers as much choice as we can get. We were expecting supply issues to get more resolved as we go into this period right now. Omicron has put a bit of a dent on that. There are more supply challenges and we would expect more challenges over the next four or six weeks.”

Sankaran said they think that once supply constraints ease, the company could see additional growth.

“We are hoping that part of 2022, as supply comes back, we’ll also see growth in some of the categories.”

Digital sales increase

Albertsons said its digital sales increased 9% over the previous year, but continues to not give the dollar amount of increased sales, where digital sales started and what the revenue from these purchases is now. Over two years, Albertsons said it saw digital growth of 234% – fueled largely by the COVID-19 pandemic.

“This digital transformation is designed to fuel our growth,” Sankaran said. He touted the company’s newly relaunched mobile app, which rolls a number of functions into one spot. “We are seeing increasing downloads, higher traffic, and deeper customer engagement.”

He said Albertsons saw growth in both customer “drive up and go” and delivery options, as well as growth in third-party partnerships like DoorDash and Instacart.

Albertsons owns store brands including Safeway, Vons, Jewel-Osco, and others. It operates 2,278 stores.