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Where business news starts in Boise.

Albertsons sales & profitability rise; talks Amazon, digital and that possible IPO

Boise-based Albertsons Companies turned in its results for the first quarter, eliciting congratulations from some analysts.

The company said it made money in the first quarter of 2019, compared wtih a loss in the first quarter of 2018. That adds up to a net profit of $49 million for the quarter.

Albertsons said its e-commerce sales rose 33% during the quarter. It also saw ‘same-store’ sales increase by 1.5% from the same period last year. Same-store is a way to measure earnings from period to period – leaving out newly opened or closed locations.

[New Albertsons CEO will move to Boise]

“We continue to make very good progress and are delivering very good results,” new CEO Vivek Sankaran said during an investor call Wednesday morning. “We have momentum in sales, and have reduced debt by $1 billion since year-end.”

Debt and a possible IPO

Debt has weighed on Albertsons for years – fueled in part by the acquisition of Safeway in 2014, which cost $9 billion. The company set a goal of reducing its leverage – the amount of debt that sits on its books, and is nearing that benchmark.

Albertsons remains a private company, after several failed attempts to go public. The company initially said it would go public by the end of 2017. It held off among a rocky market and tough financial results. It put the plan on hold – then formally canceled it when it announced a merger with Rite Aid. The Rite Aid merger fell through, leaving Albertsons a private company with no announced plan to go public.

Now, with its debt levels decreasing, an IPO could be on the horizon.

“We think that it does position us well that when the timing is right and everything else lines up for us, an IPO could be in our future,” Bob Dimond, Albertsons CFO said.

The company cut a real estate deal, to sell 50 store properties and a distribution center for $886 million. The company will lease back those properties.

New CEO’s start, and the threat of Amazon

Sankaran said he spent the first 90 days on the job on a listening tour of sorts – talking to employees, customers, and investors.

“I’ve come away very encouraged about our prospects to serve our customers even better – in-store and online,” he said. “Overall our goal remains to be the favorite omnichannel grocery provider.”

Analysts asked Sankaran and Dimond about Amazon moving further into bricks and mortar retail. Amazon purchased Whole Foods in 2017, launched scores of Amazon Go, Amazon Four Star and Amazon Books locations – and has cut deals with Kohl’s and even former Albertsons merger partner Rite Aid.

[Albertsons faces three separate actions related to opioids]

Sankaran says Amazon’s strategy dovetails with Albertsons’ model.

“The way I see that is an affirmation that you need assets on the ground and stores on the ground – we talk about being an omnichannel grocer, and I think it reinforces the theory.”

Additional notes

A few more notes of interest from the earnings call:

  • The company will look at acquisitions as opportunities arise.
  • New micro-fulfillment centers are launching to support delivery.
  • Albertsons is working to integrate its point-of-sale system to work with Instacart, Door Dash, Uber Eats and Grubhub.
  • The number of “Drive-Up and Go” stores stands at 300, and will rise to 600 by the end of the year.
  • Albertsons will remodel 280-300 of its stores and open 15-17 new stores this year. It also continues to close underperforming stores.

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