Dive Brief:

• Albertsons CEO Vivek Sankaran said during Monday’s earnings call that Albertsons gained “several million” new customers during Q1 as restaurants and other businesses closed down and stay-at-home orders went into effect.
• Albertsons plans to leverage its loyalty programs to deepen engagement with its new and existing shoppers. The grocer stepped up expansion of its Just 4 U loyalty program to more areas, and plans to continue doing so throughout the year. Loyalty signups increased 27% during Q1, to more than 22 million members.
• The company will also accelerate the rollout of its Drive Up & Go curbside pickup program. It plans to have the service available at more than 1,400 locations by the end of this year — a 40% increase over its previous rollout plan. Drive Up & Go is currently available at 731 stores, up from around 600 at the beginning of the year.

Dive Insight:

Investors weren’t high on Albertsons first earnings report this week as a publicly traded company, noting the deceleration in the grocer’s same-store sales late in the first quarter and into July. But Albertsons is very happy with the inroads it’s making with new and existing shoppers that could serve as a foundation for future growth.

Many of those shoppers flooded the company’s e-commerce services and continue to shop online only, while even more are shopping both online and in stores. Albertsons doesn’t want those shoppers leaking away to competitors anytime soon, so it’s ramping up its investments in technology, e-commerce and its popular loyalty programs.

“We are very focused on retaining our new customers and retaining the incremental spend of our current customers,” Sankaran said during Monday’s earnings call.

The grocer has expanded its loyalty programs to more geographies, which helped drive up adoption. But shoppers are using their rewards, coupons and other program perks more often, too. The number of members who redeemed loyalty benefits grew 32% year-over-year, and 40% are claiming more perks through the personalized program.

Sankaran said Albertsons will continue to expand its loyalty offerings as shoppers place a greater emphasis on grocery benefits.

"Here's how I think about it: If you're not traveling a lot, you don't care about the airline loyalty program. When you're traveling a lot, it matters a lot,” he said. “And if you're shopping a lot to buy products, eating at home a lot, a loyalty program matters and it's proving out to be true."

Albertsons’ Drive Up & Go expansion, meanwhile, comes as other retailers like Target, Aldi and Sprouts Farmers Market are quickly ramping up their click-and-collect programs. Consumers have been more enthusiastic about pickup than many retailers have expected, and in addition to expanding, companies are also waiving fees and adding extras like geofencing technology to speed up service.

Sankaran reiterated that technology is a differentiator for Albertsons. The company, which has a recent history of hiring digital executives with companies like Disney, Microsoft and Amazon on their resumes, has reintroduced self checkouts to most stores and rolled out efficiency programs in areas like produce to curb shrink and improve ordering accuracy.

Albertsons officials said they plan to spend $1.6 billion on capital expenditures this year, up from a previous projection of $1.5 billion.

Sankaran said Albertsons increased promotional activity in May and June after curbing promotions earlier in the pandemic, like many other retailers. The idea was to secure customer loyalty leading up to the all-important summer months — even if that meant eroding margins in categories like meat, which has seen record-high inflation in some areas.

Sankaran said Albertsons succeeded in winning over summer shoppers, and noted promotional activity at the company and across grocery retail remains below normal levels.

“Until the supply chain catches up or demand substantially changes, you probably won’t see many promotions,” he noted.

The current environment favors Albertsons’ conventional grocery stores, which service the stock-up shopping that many customers seek as COVID-19 continues to run rampant through the U.S. Sankaran said the company is growing fastest in parts of the country where it is not the market-share leader — indicating the appeal of its e-commerce platform, which includes same-day delivery across 90% of its stores.