Dive Brief:
- Albertsons is preparing to file for a public offering once again, according to a Wall Street Journal report. The company along with its private equity backer, Cerberus Capital Management, will decide within “weeks” whether to make the public push, targeting a valuation of $19 billion, according to sources interviewed by the Journal.
- Cerberus, which has held a stake in Albertsons for more than 15 years, is reportedly surfacing the IPO discussion because of the grocer’s strong recent performance, sales outlook and a strong stock market.
- Albertsons has reduced its debt load from $10.52 billion in Nov. 2018 to $8.34 billion as of last November. In an earnings call last week, Albertsons CEO Vivek Sankaran said the company’s 3.0x net debt to EBITDA ratio put it “in the right zone” for a possible initial public offering.
Dive Insight:
According to the Journal, there’s debate among Albertsons and Cerberus executives over whether to file for an IPO now or wait for the company to improve further and get a better valuation.
Either way, Albertsons has made a strong case of late for its long-awaited public push. It has posted eight straight quarters of comp store sales increases, with a strong 2.7% lift in this most recent quarter, indicating the company’s online and in-store merchandising efforts are paying off.
Investors may be wary of a public entrance after tech stocks like Uber and WeWork have faltered. Albertsons also plays in a highly competitive industry where Walmart, Target and Amazon are investing big bucks.
But Albertsons seems to be making savvy bets on its future. It’s been hiring digital talent from outside the industry, including a former Microsoft and Amazon executive who helped launch the first Prime Day back in 2015 and now serves as Albertsons’ executive vice president and chief customer and digital officer.
It’s also accelerating store remodels, pumping up its private brands, improving customer stickiness with its Just 4 U loyalty program and testing out micro-fulfillment centers to fill online orders. The latter technology is winning praise from experts for cost effectively improving fulfillment metrics without sacrificing speed on delivery and pickup orders.
Albertsons last filed IPO paperwork in 2015, shortly after it acquired more than 1,300 Safeway stores, but that offering was pulled amid a weak market. Albertsons and Cerberus also aimed to go public through a merger with drug chain Rite Aid in 2018. That deal fell through amid investor unease.
Albertsons will draw comparisons to fellow conventional grocery chain Kroger, which has a public valuation of $23 billion, according to the Journal. But Albertsons has matched or bested national rival Kroger on comp sales gains in four out of the past five quarters, according to financial firm Jefferies, increasingly putting the Boise, Idaho-based chain in a class all its own.
