Dive Brief:

• Albertsons reported a 26.5% increase in first-quarter same-store sales during the 16 weeks ending June 20, according to a company release. Net sales increased 21.4% over the year-ago period to $22.8 billion.
• The grocers’ digital sales increased 276% in Q1 as nervous consumers turned to home delivery and pickup in lieu of in-store shopping. This was an increase over the 243% surge Albertsons noted for the first eight weeks of Q1, and indicates the enduring popularity of online shopping during the pandemic.
• Gross profit margins increased 80 basis points to 29.8% compared to the first quarter of fiscal 2019, largely due to reduced shrink expenses and lower promotional activity. Albertsons stock fell by around 6% in early trading.

Dive Insight:

Albertsons indicated back in April that Q1 would be huge, noting a 34% increase in same-store sales and a 243% rise in e-commerce sales for the first eight weeks, which covered Feb. 25 to April 25. Results released Monday morning, however, show the company’s sales moderated following that early surge as competition from other grocers and restaurants, as well as supply chain woes, began to take their toll.

In an interview with Bloomberg, Albertsons CEO Vivek Sankaran said same-store sales have slowed to the mid-teens and that the company is having trouble keeping items like baking products and household cleaners in stock.

E-commerce sales growth actually accelerated during the last eight weeks of Q1, indicating elevated interest as well as Albertsons’ improved ability to fulfill orders. The grocer, like many others, was knocked back by a sharp rise in online ordering in late March and April. The company boosted its workforce and has opened more pickup and delivery slots. It’s offered nationwide delivery for a few years now and is quickly scaling its curbside pickup service, Drive Up & Go. The service is currently available at 731 stores, up from 600 at beginning of 2020, with plans to scale it to more than 1,000 by the end of this year, by Albertsons’ latest account.

Grocery pickup has emerged as a very popular channel during the pandemic, with consumers gravitating toward its lower fees compared to delivery and contactless service. Target, Kroger and Walmart have all stepped up availability, and in a recent interview with Grocery Dive, Sankaran said ramping up click-and-collect is a priority for the grocer.

“We have a lot of headroom, a lot more stores where we can activate Drive Up & Go,” he said. “We’re going to accelerate at a much more torrid pace.”

Consumers are still shopping inside stores. Weekly foot traffic to Albertsons locations has increased on a year-over-year basis over the past month, according to data from Placer.ai. The weeks of July 6 and July 13, traffic increased 10.1% and 9.3% over 2019, respectively.

Research shows consumers are shopping less frequently but buying more when they do, benefiting conventional grocers like Albertsons that are built for stock-up shopping. As COVID-19 cases remain high and threaten to grow during the fall and winter months, Albertsons will remain a destination for shoppers and have more time to convince them to become long-term customers.

However, rising cases are also putting a strain on the supply chain, with manufacturers like General Mills and Conagra Brands struggling to keep up with demand as consumers stay at home following stricter guidelines from states and cities. Grocers have also struggled as restaurants have reopened and shifted to takeout service. According to the Census Bureau, grocery sales dropped 1.6% in June compared to May while restaurant sales rose 20%.

In its earnings release, Albertsons noted it spent $615 million in Q1 on safety expenses and worker compensation. The grocer ended its hourly pay increase in mid-June alongside other retailers, but calls from consumers, legislators and unions to reinstitute so-called “appreciation pay” have grown louder as COVID-19 continues to run rampant. Albertsons also said that the company can't forecast sales for the year because of the continuing impact of COVID-19 on its business. 

Earlier this month, Albertsons also joined fellow grocery chains in requiring shoppers to wear masks inside all of its stores.