Albertsons introduces new market concept
Albertsons eked out a profit in its latest fiscal year, ending a string of money-losing years and brightening the Boise grocer’s future as it prepares to merge with Rite Aid.
The debt-burdened company on Wednesday reported $46.3 million in net income for the year that ended Feb. 24, compared with a $373.3 million loss a year earlier, $502 million two years earlier, and $1.2 billion for Albertsons and Safeway combined the year before that, when Safeway was still independent. Albertsons acquired Safeway in 2015.
Executives say the consistent improvement reflects their focus on wringing out inefficiencies, improved marketing, and attention to customer desires and service. And they expect the upward trend to continue.
“Our future has never been brighter,” said Jim Donald, the company’s new president and chief operating officer, on a conference call with investment analysts.
But Albertsons still faces problems with consumers. Foot traffic in the company’s 2,300 stores continued to fall in the latest quarter, said Bob Miller, the chairman and CEO. The number of customers fell 0.8 percent, though Miller said that is “a substantial improvement over our trend for last year.”
That decline was offset by bigger bills customers paid at checkout — up 1.4 percent. Miller credited that increase to more-strategic promotional discounts, continued emphasis on local decision-making to meet customers’ changing needs, and inflation.
And overall sales are rising only slightly. Sales for the year were $59.9 billion, up from $59.7 billion a year earlier.
Inflation will help
Inflation is likely to tick upward and should contribute to rising sales this year, Miller said: “We expect to see more inflation, and we think we’ll have the ability to pass that on” to customers.
Albertsons is Idaho’s biggest company, with 280,000 employees nationwide, including 4,700 in Idaho. Losses in the past few years offered reason for concern, especially given Albertsons’ troubled history this century.
The company Joe Albertson founded with his first store at 16th and State streets in 1939, Albertsons Inc., broke up in 2006 after years of losses. Supervalu bought some of its stores under several banners, including the Idaho Albertsons stores, while an investment consortium led by Cerberus Capital Management in New York bought the Albertsons-banner stores Supervalu didn’t want.
But Supervalu failed to make its big acquisition work. It finally sold its Albertsons Inc. stores to Cerberus in 2013, reuniting what remained of the old chain after seven years of closures of money-losing stores by both companies.
Coming: Rite Aid merger
While Cerberus has succeeded in boosting the surviving stores’ operating profitability, it borrowed billions of dollars to buy Supervalu’s stores and, in 2015, the larger Safeway chain. Debt payments of up to $1 billion a year have kept Albertsons from turning a profit sooner.
In February, Albertsons announced that it would merge with Rite Aid. Rite Aid has struggled with declining sales and competition from the bigger CVS and Walgreens drug-store chains. But Albertsons sees potential in the 2,600 Rite Aid stores left after that company sold 2,200 stores to Walgreens last summer. Albertsons’ own pharmacy customers spend far more money per store than its nonpharmacy customers do.
Once they merge, as is expected later this year, Albertsons will become a publicly held company, as Rite Aid is and as the old Albertsons Inc. was. That means Albertsons stock will be available. Meanwhile, the company is reporting its earnings publicly.