Albertsons Cos. Sees Inflation-Driven Increases in Q3

Albertsons Cos. is reporting a strong third quarter, ended Dec. 3, 2022, amid its continued legal efforts to pay out a $4 billion special dividend to shareholders as part of its planned merger with The Kroger Co. The grocer points to retail price inflation as the main driver behind its 7.9% year-over-year increase in identical sales and higher fuel sales, with CEO Vivek Sankaran also pointing to its digital transformation efforts and differentiation in private label offerings.

Albertsons saw $18.2 billion in net sales and other revenue during Q3, compared to $16.7 billion during the same period in 2021. Additionally, digital sales increased 33%, loyalty members increased 16% to 33 million and net income was $376 million, or $0.20 per share. The grocer had an adjusted net income of $505 million, or $0.87 per share, and adjusted EBITDA was $1,158 million.

"Our team continues to deliver strong performance as we execute against our Customers for Life strategy and bring people together around the joys of food and inspire well-being," said Sankaran. "Our investments in digital transformation, differentiation in Own Brands and Fresh offerings, and the modernization of our operational capabilities contributed to these results. I want to thank all of our teams for their commitment to serving our customers and living our values every day."

Continued Sankaran: "As we look ahead to the balance of the year and into fiscal 2023, we believe that all of these initiatives position us well to continue to drive top-line growth and deepen our customer and community engagement both online and in-store. At the same time, our ongoing productivity engine is expected to continue to support our investments and partially offset anticipated inflationary cost increases, declines in COVID-19 vaccination and at-home test kit revenue, and macro-consumer headwinds."

Increases in product, shrink and supply chain costs, as well as a decline in COVID-related revenue, contributed to a gross margin rate decrease to 28.2% during Q3. Selling and administrative expenses decreased to 25% of net sales and other revenue, which Albertsons said was primarily attributable to ongoing productivity initiatives and sales leverage.

Earlier this month, Albertsons was granted a Jan. 17 review of the temporary restraining order against its previously announced $6.85-per-common-share special dividend. At that time, the Washington Supreme Court, sitting en banc, will review the appeal of the attorney general of the State of Washington, which was originally scheduled for Feb. 9.

The company continues to believe that the claim brought by the attorney general of the state of Washington, as well as the similar lawsuit brought by the attorneys general of California, Illinois, and the District of Columbia, is meritless and provides no legal basis for preventing the payment of a dividend that has been duly and unanimously approved by its board of directors.

Meanwhile, Albertsons’ proposed merger with Kroger is continuing through required regulatory review, which includes seeking clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Boise, Idaho-based Albertsons operates more than 2,200 retail stores with 1,700-plus pharmacies, 402 associated fuel centers, 22 dedicated distribution centers and 20 manufacturing facilities. It operates stores across 34 states and the District of Columbia under 24 well-known banners, among them 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. Albertsons is No. 9 on The PG 100, Progressive Grocer’s 2022 list of the top food and consumables retailers in North America. Cincinnati-based Kroger is No. 4 on the list.