Albertsons CEO Vivek Sankaran: “Omnichannel strategy works”
Albertsons Cos. is moving forward with its omnichannel expansion but has pushed back some of its expected micro-distribution center (MFC) openings to next year, according to CEO Vivek Sankaran.
In a conference call yesterday on second quarter fiscal 2021 results, Sankaran said Albertsons plans to open four more MFCs by the end of the year, adding to the three locations already in operation. activity, including two in Safeway supermarkets in southern San Francisco and San Jose, California. That’s down from the nine MFCs, powered by partner Takeoff Technologies, that Albertsons planned to have by the end of 2021.
“We are improving our productivity in our three existing MFCs, and we have plans for four more MFCs before the end of our fiscal year, bringing the total to seven,” Sankaran told analysts on the call. “This is two less than expected, as the launch of two sites has moved to fiscal 2022, mainly due to delays in construction.”
Sankaran provided the MFC update in an overview of Albertsons’ progress on its strategic priorities, which include accelerating its digital and omnichannel capabilities. In the second quarter of 2021, the Boise, Idaho-based supermarket giant saw its digital sales increase 5% year-on-year, for cumulative growth of 248% over two years. In large part, this is because the retailer has expanded the reach of the click-through delivery and pick-up service, he noted.
“Digital transformation is imperative in our growth strategy as we aim to deliver a range of convenient shopping experiences to our customers. To this end, we have expanded our Drive Up & Go [curbside pickup] sites to over 1,900 and hopes to reach around 2,000 sites by the end of the year, ”Sankaran said.
“Deploying our digital and omnichannel capabilities is built on our goal of delivering a superior customer experience, as well as improving profitability over time,” he explained. “For example, in Drive Up & Go, our average wait time for pickup is now three minutes. On delivery, we continued to accelerate delivery times while reducing delivery costs per order by expanding our network of third-party delivery stores, and we added DoorDash within one hour to all divisions, with a catalog of more than 40,000 products. And we also announced DoubleDash, allowing customers to combine restaurant meal delivery and grocery delivery in one trip. In loyalty, our integrated loyalty and e-commerce application is now fully deployed and offers a connected customer experience, with redesigned rewards and other new features.
Albertsons has also invested in an improved customer experience in stores, including through fresh food and private labels, which the company calls its own-label portfolio.
“In expenses, our efforts to differentiate our offerings generated high demand, with expense growth exceeding downtown stores by around 250 basis points year-over-year,” according to Sankaran. “Sales in each of our fresh food categories remain ahead of pre-pandemic levels as customers continue to consume more meals at home.”
Meanwhile, new private label offerings and expanded distribution across Albertsons’ historic divisions pushed private label penetration to 25.2% in the second quarter of 2021, up around 60 basis points from to the previous year.
“During the quarter, we launched 85 new products, including ready-to-eat meals, Signature Reserve chilled pasta and several organic coffee products,” Sankaran said on the call. “Since the start of the year, we have launched over 400 new private label items and are on track to meet our goal of launching over 800 items during the year.
The investment in Albertsons stores also included the opening of seven new locations and the completion of 76 modernization and renovation projects during the first half of 2021. The company now has 2,278 food and drug stores. in 34 states and the District of Columbia, up from 2,252 a year earlier, under banners such as Albertsons, Safeway, Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets. , Pavillons, Star Market, Haggen, Carrs, Kings Food Markets and Balducci’s Food Lovers Market.
“In-store excellence has been elevated by providing the right assortment in each local market using digital tools to improve replenishment and in-store conditions, encouraging friendly customer service, and improving speed and ease. of payment through frictionless and contactless payments, ”Sankaran added.
Progress is also being made in efforts to improve productivity, which should help offset cost inflation and Albertsons’ strategic investments.
“During the quarter, we continued to eliminate waste and improve efficiency to improve promotional effectiveness, reduction in overhead, workforce efficiency and continued efforts to reduce markdown. unknown, ”Sankaran told analysts. “We continue to expect to achieve the targeted gross annual savings of $ 1.5 billion by the end of fiscal 2022.”
Albertsons’ second quarter performance, which marked a rebound from first quarter declines due to the outbreak caused by last year’s pandemic, led the company to raise its guidance for fiscal 2021. The retailer now estimates that sales are expected to fall 2.5% to 3.5% year on year (vs. previous forecast of -5% to -6%), for two-year growth of 13.4% to 14 , 4% (against 10.9% to 11.9% previously.). Additionally, adjusted earnings per share are now projected to be between $ 2.50 and $ 2.60 per share, up 30 cents from previous forecasts.
“Our omnichannel strategy works with our customers. We add clients to our franchise. They spend more with us and engage more and more with us. We continue to gain market share in dollars and units, and our trends have improved with each successive period of the [second] quarter, especially during the holidays, ”Sankaran said. “Our digital initiatives continue to drive engagement and growth. We remain focused on improving the quality and speed of service. Our productivity initiatives are paying off, strengthening our P&L environment. We also navigate the uncertainties of the times – inflation, product offering, workforce challenges, to name a few – with agility and creativity. “
Albertsons’ efforts to strengthen its workforce and talent pool included the hiring of former Best Buy executive Sharon McCollam, who took the reins as president and chief financial officer on September 7, succeeding Bob Dimond as CFO.
“We continue to add talent across the company, both at the corporate and division level,” said Sankaran. “Our outreach through career fairs for retail and distribution employees and the training we have implemented contributes to the success of our new employees and improves their retention.