Dive Brief:

• Albertsons reported identical sales growth of 2.4% and a 1.1% increase in sales and other revenue to $14.2 billion for the second quarter ending September 7, according to a company press release. This is the grocer’s seventh straight quarter of identical sales growth.
• The company also saw net income of $294.8 million in Q2 compared to a net loss of $32.4 million last year. Adjusted EBITDA grew 3.5% to $567.6 million, reflecting Albertsons’ increase in identical sales and higher gross profit margin, due in part to higher fuel margins and continued improvements in shrink expense.
• On the grocer’s earnings call, CEO Vivek Sankaran reported that online home delivery and drive-up and go sales grew 40%, which helped boost sales overall.

Dive Insight:

During Wednesday's earnings call, Sankaran pointed to four growth drivers for Albertsons to profitably build its business over the coming months. 

First, stores remain integral, particularly when it comes to offering a strong customer experience and improving productivity. Chief financial officer Bob Dimond said the company opened seven new stores and remodeled 99 in the first two quarters of fiscal 2019, and expects to complete between 220 to 240 remodels and open 14 new stores for the year. 

Another growth driver for the company is its Just 4 U loyalty program, which saw a 24% increase in registrations during Q2 from the year prior. Sankaran said the goal is to grow the program’s base and capture a larger share of wallet while using customer data to better merchandise and optimize assortment.

The grocer’s online home delivery and store pickup business is also central to its growth. In addition to the 40% sales growth in Q2, Sankaran said a recent analysis shows online shoppers spend significantly more than in-store customers. Drive Up & Go, the company's click-and-collect program, is currently available in 500 stores and will expand to 600 by the end of the year, with the rollout continuing in 2020, he said. The growth will be boosted by improved customer-facing websites, the use of micro-fulfillment centers and integration with third-party delivery services.

Finally, Albertsons’ own brands businesses continues to drive growth. The company reported sales penetration of 25.3% in Q2 and sales growth of 17.6% for its Open Nature brand. The private label assortment has been enhanced with new products like a cauliflower crust pepperoni pizza under the Open Nature label and imported cookies from its Signature brand. Albertsons launched 439 private label products in the first two quarters of the year, with plans for a total of 800 new products by year’s end.  

Sankaran also highlighted the importance of self-checkout during the earnings call, noting its expansion in many markets to meet customer demand. As of the end of Q2, Albertsons has added 1,130 new self-checkout lanes and upgraded 91 existing lanes in 245 stores. This brings the total number of stores to self-checkout to 1,075, and the company projects it will have 1,162 stores with self-checkout by the end of the fiscal year. 

"I continue to be encouraged about the prospects of our business and our ability to grow it as we enhance the customer experience in store and online and improve our operating performance," Sankaran said.  

Albertsons has also been working to decrease its debt load. In Q2, the company reduced its debt balance by $1.8 billion to date, and debt reductions for fiscal year 2019 will reduce interest expenses by $119 million annually, Dimond said.