Albertsons beats Q2 earnings estimates, raises guidance

Vivek Sankaran, Albertsons CEO, discusses the company's upbeat earnings and strong outlook despite ongoing supply chain challenges.

Video transcript

AKIKO FUJITA: Well, shares of Albertsons getting a healthy pop in the session here, up nearly 1 and 1/2% after the grocery store chain posted a surprise increase in sales. The company posted revenue of $16 and 1/2 billion, a near 5% jump from the same period last year. That growth prompting the company to raise its guidance. Albertsons now expects to earn $2.50 to 2.60 a share for fiscal 2021. Let's bring in the CEO of Albertsons. We've got Vivek Sankaran joining us today. We've also got Yahoo Finance's Brooke DiPalma joining in on the conversation.

Vivek, it's great to have you on today. Certainly a very strong quarter. The Street liking it, but I wonder if we can move the conversation forward, as we've been talking to companies about global supply chain disruptions. I know you're certainly not immune to that. How has that affected Albertsons directly? And how are you shifting up daily operations to make up for some of the supply shortages?

VIVEK SANKARAN: Akiko, good morning. And I'm delighted to be on this. You are right. We are not immune from the supply challenges. We see it. It's spotty, let me put it that way. The first thing I want to emphasize is, it's nothing like we saw during the early days of the pandemic, where we shouldn't be worried we cannot get food and cannot get the items we want. They said that availability is spotty.

And the way we do that, the way we help customers is to make sure that we are always giving people alternatives when they come into that store. You may not find exactly what you want, but you find something else. Next week, you might get exactly what you want because a lot of products are on allocation. And that's especially true as we go into Thanksgiving. The other thing we're doing is making sure that we can get product out as soon as we get them. So turkeys are on the shelves already, and so that we can smooth the supply chain out and make sure that consumers feel comfortable that the product is arriving, and they'll be ready for the holiday.

BROOKE DIPALMA: Vivek, speaking of that consumer, consumer price index jumped 5.4% in the month of September. Now, in this morning's call, you said that inflation is manageable and is being handled by both region and location. But what sort of impact is Albertson's expecting? And how can customers expect their grocery bills to change in the coming months?

VIVEK SANKARAN: You know, Brooke, this time around, I think the one backdrop we have is that we have a consumer that's still strong, strong balance sheets. And so we haven't seen any fundamental change in the behavior of consumers as to what they're buying. There's no-- we haven't seen a trade down that you would expect to see if in the consumer's wallet's tightening. And so the way we manage those by making sure we give consumers choices. You can always get an opening price point with one of our own brands. You can make tradeoffs within protein, because if something goes up, something else is going down, and you can make sure you buy that product.

And so I would suggest that I think we're still seeing inflation at a level, at least in food, that is still manageable for the consumer and manageable for companies like us from a gross margin standpoint and the overall profitability standpoint. I suspect that that's going to continue for the next several months.

ZACK GUZMAN: Vivek, Zack here. It's good to chat with you again. I mean, there's a lot in this report here to celebrate. You guys' same store sales up 1.5% in the quarter. That was well above expectations there. The Street had an expectation of a 1.9% decline, so a clear impressive beat to the upside there. I wonder, though, what has you most excited in terms of how you're differentiating from the competition right now? You've talked a lot about getting consumers to spend more in store at your guys's grocery stores. Talk to me about what you're seeing there as you guys continue to take share.

VIVEK SANKARAN: The single metric that we focus on every Monday that I look at is market share gains, both in dollars and in units, because at the end of the day, we sell things that people consume. There's a lot of things working for us. Number one, we focus on everyday execution in our stores. Because if that doesn't work, you cannot do much on top of that. And what we've done is put a lot of digital capability on top of that so people can pick it up in a store in a parking lot, have it delivered at home, delivered in short time frames. And that's helping us.

So this combination of having full variety in our store, providing the convenience of delivery and pickup, and having a much bigger fresh mix in our store than others is helping us because you're eating more at home, you're buying more fresh food. And so it's a combination-- in summary, the transformation strategy that we're on is working for us. And we've got plenty of headroom left in the current plan.

BROOKE DIPALMA: Vivek, transformation was also really the name of the game this quarter. You mentioned that word many times in this morning's call. Now you also noted that Albertsons's omnichannel consumer is essentially spending three times more than the traditional consumer. So when you look at the roadmap for that digital customer, what exactly is Albertsons expecting in terms of both delivery, loyalty, and ordering online?

VIVEK SANKARAN: Brooke, continued growth on that front. Our omnichannel strategy is built around our stores. If you think about over-- and some of our banners, by the way, are over 100 years old, and they've been-- they're in fantastic locations, close to where people live. And that's inventory close to where you live. So we're building our omnichannel strategy around those stores. And what you're finding is that there are people who are comfortable with the quality and the assortment that they've seen in the store.

And now they know that that same assortment, which, by the way, is curated for what matters to them in that particular neighborhood, is available, either for delivery or for an easy pickup. And I think that creates this virtuous cycle where people are engaging, now they can go to the store when they want to do a fresh shop or want that experience, and they can take care of things with the convenience of online. That's why we think it resonates so well with people doing both.

And when people do both, they just spend more with us. And it clearly means that we're getting market share from somebody else, because they're not eating more. And I think that's plenty of headroom, as we get better at it and as consumers just get more used to this mode of operating both online and in-store.

AKIKO FUJITA: Vivek, going back to what you discussed earlier about some of the shortages that you were saying, what are particular products that you're seeing shortages in?

VIVEK SANKARAN: Yeah, Akiko, I'd say, we've seen it in sports drinks, soft drinks. We see it in pet, we see it in frozen. We see it every so often in certain protein categories. And so, it is all around the store. Continue to see it in certain laundry and cleaning products. We continue to see it in paper products.

My overall message, though, is that I think it's sporty. It's not a chronic problem where people can't get the supply. It just comes in waves in different categories. And as people are a little patient over a week or a two-week period, they could always get what they want. It's different from what we saw in the pandemic, early days, where we were clearly short of certain products and the demand was far outstripping supply.