Albertsons raises fiscal outlook as it posts increase in Q3 revenue
Amid the backdrop of the lingering COVID-19 pandemic, Albertsons' net sales and other revenue reached $16.7 billion during the 12 weeks ended Dec. 4, 2021 compared to $15.4 billion during the same period in the prior year.
The increase was driven by the company's 5.2% increase in identical sales, as well as higher fuel sales and sales related to stores acquired and opened since the third quarter of fiscal 2020. Retail price inflation and incremental sales related to administering COVID-19 vaccines contributed to the 5.2% identical sales increase, Albertsons said.
Gross margin rate decreased to 28.9% during the third quarter of fiscal 2021 compared to 29.3% during the same period in the prior year. Excluding the impact of fuel, gross margin rate increased 10 basis points compared to the third quarter of fiscal 2020. The increase in gross margin rate was primarily due to productivity initiatives, improved pharmacy margins related to administering COVID-19 vaccines and favorable product mix. This increase was largely offset by lower gross margin rates across certain product categories due to the rate impact of increased product costs driven by the current inflationary environment, as well as higher supply chain costs, Albertsons said.
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"We are pleased with our third-quarter results as we continue to execute against our transformation strategy. A favorable economic backdrop together with the heroic performance of our frontline retail, distribution and manufacturing teams contributed to these better-than-expected results," said Vivek Sankaran, CEO. "Also driving these results was our continued focus on in-store excellence, acceleration of our digital and omnichannel capabilities, and delivery of our productivity initiatives. During the quarter, we continued to gain market share in both units and dollars and saw ongoing improvement in both the in-store and online customer experience."
Selling and administrative expenses decreased to 25.4% of net sales and other revenue during the third quarter of fiscal 2021 compared to 28.0% during Q3 of fiscal 2020. Excluding the impact of fuel and the $285.7 million charge related to the withdrawal from the United Food and Commercial Workers International Union Union-Industry Pension Fund during the third quarter of fiscal 2020, selling and administrative expenses as a percentage of net sales and other revenue decreased 20 basis points.
Albertsons attributed the decrease in selling and administrative expenses to lower COVID-19 related expenses and the execution of productivity initiatives. This decrease was offset by higher employee costs, depreciation and other expenses related to the company's investments in its digital and omnichannel capabilities and other strategic priorities. The increase in employee costs was the result of additional labor to support the increase in fresh sales, market-driven wage rate increases and higher equity-based compensation expense, stated Albertsons.
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Other income, net was $38.3 million during the third quarter of fiscal 2021 compared to $19.2 million during the third quarter of fiscal 2020.
Net income was $424.5 million, or $0.74 per Class A common share, during the third quarter of fiscal 2021 compared to $123.7 million, or $0.20 per Class A common share, during the third quarter of fiscal 2020.
Adjusted net income was $457.2 million, or $0.79 per Class A common share, during the third quarter of fiscal 2021 compared to $386.6 million, or $0.66 per Class A common share, during the third quarter of fiscal 2020.
Adjusted EBITDA was $1.05 billion, or 6.3% of sales, during the third quarter of fiscal 2021 compared to $967.7 million, or 6.3% of sales, during the third quarter of fiscal 2020.
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Net sales and other revenue was $16.7 billion during the third quarter of fiscal 2021 compared to $14.1 billion during the same period of fiscal 2019. The increase in sales compared to the third quarter of fiscal 2019 was primarily due to the 17.5% increase in two-year stacked identical sales, the company noted.
Gross margin rate increased to 28.9% during the third quarter of fiscal 2021 compared to 28.3% during the same period of fiscal 2019. Excluding the impact of fuel, gross margin rate increased by approximately 40 basis points compared to the third quarter of fiscal 2019, primarily driven by sales leverage, productivity initiatives and improved pharmacy margins related to administering COVID-19 vaccines. This increase was partially offset by growth in digital sales and an increase in product and supply chain costs driven by the current inflationary environment, the company noted.
Albertsons updated its fiscal 2021 outlook and now expects identical sales in fiscal 2021 in the range of 0.8% to 1.2%, from 2.5% to 3.5%, representing two-year stacked growth of 15.7% to 16.1%, previously from 13.4% to 14.4%.
Albertsons expects adjusted EBITDA in the range of $4.25 billion to $4.30 billion, (previously from $3.95 billion to $4.05 billion); and adjusted net income per Class A common share in the range of $2.90 to $2.95 per share, previously from $2.50 to $2.60 per share.