eResearch | Albertsons Companies, Inc. (NYSE: ACI) released positive financial results for the fiscal first quarter of 2020 at the end of last month but investors were looking for a bigger boost from the pandemic economy.
The fiscal quarter, which ended June 20, 2020, was the first financial results since the company went public on June 26, 2020 and was a record quarter by all measures.
“We generated strong financial performance in the first quarter, including robust cash flow and enhanced liquidity, which support our continued investment to benefit our associates, customers, communities and stockholders,” said Vivek Sankaran, president and CEO of Albertsons when commenting on the financial results during the conference call.
FQ1/2021 financial highlights included:
- 21.4 % increase in Sales to $22.8 billion, up from $18.7 billion sales in FQ1/2020.
- Same store sales increased by 26.5% in FQ1/2020 from the previous year but were offset by store closures and lower fuel sales.
- Digital sales increased 276%, mostly driven by COVID-19.
- Adjusted EBITDA was $1.7 billion or 7.4% of sales compared to $877 million in FQ1/2019, resulting in a 93% increase.
- Incremental COVID-19 costs of approximately $615 million, including approximately $400 million in onetime or nonrecurring expenses, were offset by strong cost control measures.
- Albertsons also generated record free cash flow with $2 billion in cash; net debt to adjusted EBITDA improved to 1.8 times on Last Twelve Months (LTM) basis.
- Net income of $586 million in FQ1/2020 was up from $49 million in FQ1/2019.
Poor stock performance despite great financial performance
Albertsons had a solid first quarter – sales were high, costs were controlled, and cash flow was strong. However, their better than expected results did not translate into a positive stock price movement. The stock initially rose following the first quarter results, but later declined 4.9% to $15.32.
After the IPO, Albertsons’ stock had a weak start after debuting on the NYSE at $16 on June 26, 2020, closing the first day at $15.45, and has traded as low as $14.
Given the big sales boost food retailers received from the COVID-19 crisis, investors were expecting higher revenue and earnings from Albertsons.
What is “in-store” for the rest of 2020
Continued outbreaks in COVID-19 cases in the U.S., especially in states like California, Texas and Florida where the company has a large presence, requires Albertsons to adjust its strategies in real-time.
As expressed by Vivek Sankaran, CEO and President, the focus going forward is on growth, productivity, technology, culture and delivering an easy, exciting and friendly shopping experience.
The Company wants to emphasize more innovation and growth in their brand portfolio. In the most recent quarter, over 400 new items were introduced into their brand portfolio and plant-based offerings were also increased.
They will also prioritize investments in digital and eCommerce solutions and the expansion of their delivery service.
The Company declined to provide guidance citing the unpredictable impacts of coronavirus on markets. Yet, given the current situation, a full year guidance could have been a great way to reassure investors about their ability to sustain growth for the long term.
CHART 1: ACI versus S&P 500 since ACI’s IPO on June 26
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All figures in USD unless otherwise noted.
