Albertsons E-commerce Success While Investors Skeptical of Rite Aid Merger

74
Albertsons

At an earnings call on Monday, Albertsons reported a $17.7 million net loss which, compared to last year’s $204.9 million loss for the same period, is a major improvement.

According to Food Dive, Albertsons’ net sales are up 1% to $18.7 million. Same-store sales are up .2% and expected to hover between 1.5% and 2% for the rest of fiscal 2018. A report from the Idaho Statesman newspaper claims that same-store sales figures are based only on sales at stores that have been open for at least one year. Apparently, “increased fuel sales of $154.1 million accounted for most of the increase” in same-store sales. Gasoline is available at almost 400 Albertsons locations.

Most impressively, the Idaho-based company reported a 108% increase in e-commerce sales during the first quarter of 2018, emblematic of Albertsons’ progress with store pickup services, home delivery, and meal kit company Plated. Company executives state that Albertsons plans on expanding Drive Up & Go, its click-and-collect service, which they hope to bring to several hundred locations by the end of the year.

At the earning’s call, Albertsons president Jim Donald stressed the company’s focus on expanding these e-commerce platforms, lowering its pre-existing debt, and updating loyalty initiative programs.

“It’s a continuation of all the things we’re doing,” he said.

Albertsons also reported that its private brands have been selling at an all-time high, now making up 24% of total sales. The company expects its private brand sales to gain momentum as they continue to focus on their natural and organic lines (O Organics and Open Nature).

While Albertsons is profiting greatly from e-commerce endeavors and its private brand offerings, opposition toward the company’s planned merger with Rite Aid has been growing. To combat the heat, Albertsons executives have been boasting the potential benefits of the deal. They claim that the merger would allow the company to establish itself in key markets, and therefore have more sources of income. Executives also promised that the Rite Aid merger would be less “operationally complex” then the Albertsons-Safeway merger.

Food Dive reports that Albertsons CEO, Bob Miller, “noted that the retailer’s pharmacy customers spend 3.5 times as much with the company per transaction compared to regular customers, and that the merger would result in an estimated $375 million in annual run-rate synergies over three years.”

Executives and merger-supporters theorize that the joint forces of Albertsons-Rite Aid could result in “significant cost savings and sales benefits.” However, there is a common belief that if the integration process doe not go smoothly, the companies could face detrimental losses.

This is, in part, due to Albertsons remaining debt and the stiff corporate competition posed by other players in the market. Massive companies like Amazon, Walmart, and Kroger are all evolving and breaking barriers in various industries. Therefore, Albertsons will need to work hard in order to grow and thrive in today’s competitive climate.

The merger with Rite Aid comes up for a shareholder vote next month, and is expected to close this year.

LEAVE A REPLY

Please enter your comment!
Please enter your name here