ACI - Earnings call transcript Q1 2021 | Albertsons Companies, Inc.

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Operator

Thank you for standing by. Welcome to the Albertsons Companies' First Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode until the Q&A session. This call is being recorded. After the presentation there will be an opportunity to ask questions. to Treasury call and like Plaisance, to now of GVP Investor would hand over the Melissa I Relations. Please go ahead.

Melissa Plaisance

strategic you Good progress us insights first well for Dimond, quarter our earnings statements securities provide you details into of our to President during for our statements first Vivek well our Today, within federal against remarks. then will and company laws. thank review priorities. like forward-looking me the XXXX as full-year XXXX Bob that CEO; that outlook the call some With this conference the remind Bob Q&A for handing morning first quarter as call. After or the over management Vivek as back Sankaran, quarter from are may a CFO. our could as results, and Albertsons will our comments, of include and we I'd conduct updated make it Companies' today joining management's financial will share meaning are closing before session. Vivek to

limited are to facts information about but not future performance. operating statements Forward-looking contain or financial historical

Forward-looking expectations and risks actual and uncertainties and uncertainties to COVID-XX our on related involve the different cause statements to pandemic. results that anticipated. assumptions could be events These risks based and or materially are those current from include those

to today's statements the we could forward-looking factors we forward-looking the including the only and net concerning net of in contained I undertake a update result And with statements that adjusted or XX-K, Forms information, filings, actual certain obligation and financial financial that those time to that, a cause and and and in of statements revise time over included otherwise. to are adjusted the today information income are X-K. or Please income as on will And non-GAAP no reconciliation events, prepared measures. results materially will management's in any of SEC information as keep historical are includes Vivek. hand our Additional to in differ mind make remarks date, statements future from to call EBITDA. from such new Any XX-Q, be

Vivek Sankaran

our everyone uncharted in us effectively. we of for around that exceeded Good with metrics, for QX related customers key last executing joining run I rates deepening more with to and territory efficiently this the of as focused in thanks confidence our all lifted. to pleased stock-up year's year. the strategy balance relationships dynamic period We accelerated environment, entered and various COVID morning vaccination comparisons to am today. this In on our Melissa. across internal and Thanks, gradual plans centered reopening the business restrictions leveraging were geographies our and report our quarter remain pandemic technology and increasing results our

mass, Our MULO, ID two on to we food, continue military most gain basis. basis, drug, market includes in sales and which and food grew XX.X% on year in one-year and basis a a club, a two on share dollar year

At in-store as shopping adjusted of resonate year-over-year the coverage of – fiscal options same transactions end in e-commerce QX of every households flat and on have sales the of share fresh. our EBITDA versus time, Against in-store XXXX, and of we all XXXX. customer and X.X household number XXXX, those are last with of in that rate of XXX%. stacked two that we seen achieved a have levels achieved and years growth of $X.XX omnichannel our had in net in-store initiatives We've a sales in XXXX, year many strong. two have increased digital in XX% year in QX of their a adjusted QX the pickup retention In times into than in a ID quarter the has EBITDA continued with been and and XX% spend ago, we of spend with of place, customers retained exclusively digital as growth total ahead in we have the incremental two had our shopper. quarter $X.X move sales At of virtually we we omnichannel, addition, per backdrop also we achieved focused XXX% exceeding spend the an a to the we of customers our times billion stores they seen growth expectations. EPS trips with With

their in in-store customer omnichannel year-over-year fact, year-over-year. sales were X% identified in We've members. by needs for for XX.X QX households loyalty for to just U us the identified personalize average Membership down XXXX year-over-year over QX our weeks, households so can to XX and incremental understand million and them recurring and our accelerate sales were up and the offerings up was shoppers allowing we last our in XX% drive better only spend. to continued program In with while grown

customers a our with on by levels top and In-store culture. with more home. working. XXX U the our excellence, for XX% that customers our give which center giving us actively pre-pandemic outpaced at provide of a approximately and points as productivity, and Remember households. of focused through fresh us fresh, confidence that of and excellence have just has to through of actively engagement by Overall, a and offerings our our customers been categories four ahead engaged customers to engage summary, talent Brands In The our consume strategy the fresh we for the focus building in-store each by omnichannel In more a on and strategy We continue lasting four us. XX% sales see for engaged quality, two-year competitive digital which increased has is combination department strategic is of advantage. continue also strategy with spent store we is that line. always and in-store capabilities, basis our continue demonstrated number almost relationships we times accelerating growth customers retention stickiness digital strengthening Own fresh basis, one-stop priorities: variety driving depth supported of driving meals our us, experience shopping our to a rate

opened As seen our markets more in growth. as up, customers a for driver shopping to have fresh we've continue see our and stores key often

products, sales by focus that as Own with Our to were Brands on well new driven historically our appeal Albertsons' as customers legacy also portfolio introduction underpenetrated. our continues to the innovative of strong divisions

over supply when QX penetration from basis up XXXX issues QX XXX points Our was sales sales. XX.X%, impacted

launching XXXX, Signature were patties. QX items, farms nuts Open many of mixes, XXX and select various butter, We beef fruits, including continued almond items and in to premium which Signature Nature bulk innovate trail new dried

to private Game Brand to the revitalized XXX industry. Changer expect We of a Magazine items launch the year. team also this as proud Store We're our Own XXXX continue brand over was named that Brands that

We on consumers also demand for as come of fresh us beyond continue to purchase capitalize the ingredients. and to for food convenient meals

expect begun and the rollout of in our meals, ready year and end. stores have approximately to eat, XXX fiscal meals We ready program by our heat cook to be our to to ready ready

opened We upgraded during we our remodeled Finally, stores. XXXX. and in projects invest new completed five QX continue to stores XX

locations for digital We for area to us of a the customers. experiences provide DUG is Digital as priority year new driver approximately net capabilities. Drive XXXX, our an omnichannel to X,XXX in grew our growth have Up acceleration to second we coverage QX the sales shopping in convenient expect our is XXX total locations and now locations, quarter. & of DUG XX% important second XX% strive Our end added and an by Go representing the We bringing DUG X,XXX of year-over-year. approximately

we focused delivering customer of experience as superior as part improving the As also growth well in our plans profitability. on remain digital,

continue on-time San expanding an We excess year XX% on total third delivery while a adding to six has our X integrated divisions to options, been time delivery the brings a delivery that We which out tilling our we the began Berryessa rolled for end example, times connected single new MFCs. offerings our to experience before by of rates DoorDash We Jose pickups. and loyalty plans of MFC, delivery additional and For rollout store launched while app consistent and delivery networks, to through the nine up sped interface. also achieve demonstrating e-commerce order of customer and in e-commerce our MFCs hour fiscal one so delivery per reducing cost party of DUG far.

processes, all picks increasing by We locations one support customer and migrating also enhancing picking And we enhanced per picking optimize implemented and improved software hour IT platform. order our standardize help prioritization. to to service at all DUG

internal making productivity expectations help progress productivity to support reinvestment agenda priority we the QX. exceeded and our strategic inflation. driving third offset business our against We're Our is in and in

expense. During optimization, labor the efficiency, significant we made shrink, indirect in promotions quarter, progress and

to expect in achieve XXXX. gross $X.X savings to fiscal by billion end continue We of the

our strengthening and is culture priority fourth talent we communities Our serve. supporting and the

continue and Officer, well who We teams the corporate are proud the talent are level, to Jennifer the Merchandising appointment changing a both add including very company our and Chief recent to division our of at Saenz, store-level new throughout environment. of adapting

date, also have COVID through administered team our continues communities. million To X pharmacy vaccine for they to doses. Our come

resulting drive summer. which to generous addition, children our Nourishing in by funds the $X was at during families stands, feed In this in raised million QX, matched our fundraising approximately Foundation check Companies Neighbors our from and customers million $XX Albertsons

of And an goals and And completed program zero-emission packaging introduce part conjunction and stewardship. carbon that on XXX% supplier on targets been for reduction baselining we in focus we're community partnerships the diversity a database our our are grocery further in to our announced improved delivery footprints tool. ESG, we materiality waste, refrigerated with recently and focused plastic and food have ongoing DE&I company tracking quantifying recently assessment, and developing opportunities, As our enhancing we new and our America through first truck. new

expect key to and areas year. And first like Bob now and quarter results focus share this would cover I We commitments details outlook. financial later to the our of ask to our

Bob Dimond

update details first everyone. XXXX many levels. cases, our performance our as outlook. will hello, I quarter comparisons our first to and pre-pandemic results In pleased our on period make of back demonstrate versus Vivek, fiscal am fiscal quarter Thanks, I the well as to to strong provide XXXX an to

which is sales quarter, results. the total up $XX.X of or primarily approximately our stacked driven fiscal XX.X% quarter first were XXXX, billion, compared sales $X.X identical billion by to XX% two-year first the For

of margin XX.X% in profit in XX% during the to in gross came XXXX. compared and QX XXXX XX.X% first at Our quarter QX XXXX

digital and initiatives, administering the profit by Excluding to XX of sales. improvements The margins partially pharmacy XXXX. XXXX, impact compared points improved compared was QX shrink basis by increase and QX leverage margin our to investments QX over driven of to primarily in is increased offset points our basis XXXX compared to fuel, related gross up relating to in vaccinations, sales our expense, growth productivity COVID-XX XX

as of deleverage SG&A of Our on a first saw the XXX percentage we points. basis versus as SG&A a $XXX demand quarter But heightened million. period a by basis fuel, percentage our significant increased related the sales expenses points in sales, importantly, COVID-XX approximately totaled decreased basis, of of XX during year. last as sales two-year quarter we year-over-year excluding the

continued during fiscal fully first some growth XXXX, or a strong representing over million Some first of approximately interest billion net ended quarter of million inventory annual compound EBITDA share, income Adjusted compared costs future approximately flexibility write-off in in closed quarter completed Interest in XX% XX% of XXXX expense will transactions are driven during be due sheet billion the flow-through successful annual XXXX. stores, representing and and per XX was Adjusted XXXX was pleased of the lower versus EBITDA growth adjusted first five, QX this us expect as diluted in compound QX deleveraging. these invest primarily rates cash The the first we was quarter invested quarter XX%. to platforms. XXXX. $XXX supplies, the average gives million technology million first balance of $XXX growth We of of represents $X.X one-time by of $XXX ago. quarters this is reduction $X.XX to with to in quarter was expense approximately to our compared $X.X and growth so opened digital five interest to expenditures in $XXX Capital the we refinancing and were in The remodels including lower. and in the nature, year the versus our in our opportunities. continue that COVID-related on

to continue approximately spend We be $X our fiscal to $X.X expect billion to billion XXXX. during

S&P LTM exited upgraded with debt-to-adjusted Moody's fourth as upgrades to an our ratio rating X.Xx levels the stable on BAA agencies at During XXXX. stable. BB quarter QX, we ended fiscal to also basis, consistent we our of quarter received the upgraded debt EBITDA from with net and us the We

for fiscal XXXX. now Turning updated to year outlook our

we in Given XXXX. guidance QX our outperformance the and fiscal for have recent trends, updated

XX%. strength to along demand in the the Some a the modest to as expect revenue the this COVID identical revenue taper to the sales gained range inflation And and during Nonetheless, business and in vaccinations for expectations. of of gives the outperformance pace in begun X.X% stack QX of related guidance the us for to advantages to business compared the of now on the the of balance vaccine off basis as continued that pass approximately to of XX% the is source ahead was the prior stickiness competitive pandemic consumer be ability items to of year. XX% premium our underlying as two-year has well of confidence slows. We

We $X.XX the expect a at range. $X.XX midpoint compounded growth range $X.XX of range, per which EPS up to in from our adjusted of the guidance of prior represents two-year the annual share, XX%

million range an weekly in date, In to share approximately core up expect $X.X continuing similar midpoint of to billion, and are representing and two-year previous to $XXX basis guidance the average compound annual range. range our QX. billion our of levels of the our we on from dollar We EBITDA growth adjusted at seeing business at sales market gains QX XX% $X.X

margin the seasonality drop and expectation current pace off EBITDA still we consensus As COVID-XX of administered, vaccinations in the QX the of appropriate. believe is result for a

the QX now provide initiatives remarks. as compared closing margins We the And our productivity that will noted of continue year year-end stronger in Vivek to we drive will believe and seasonality call. back to on EBITDA the some half

Vivek Sankaran

Bob. you, Thank

to a we Before few I want Q&A, turn share remarks. to closing

to stick a few trends impacts of hard predict over will we long-term, COVID-XX demand the While it's that the on us. there are believe with

to believe digital us our for will our we better, provides experience personalized in customers. This engagement more and shopping sector data gather with opportunity to an consumers First, increase. a continue deliver more with

use up even their consumers continuing locations. change believe are we and consumers delivery, will enhance though saw committed increase we of we in pick leveraging and our Particularly solutions, our store industry, value step XXXX, Second, to speed to rapid in e-commerce and in a store delivery. especially speed by great

Lastly, Companies means benefit for market more become reopening travel, performance. unique a our capitalize amplify sales technology work business, is backdrop, remain customers This and share drive meals. continues fresh we faster Despite trends home, at efficient With levels our our are ingredients on this business focused sales strengths better which and more in on well recent dollars, When trends given business continue at in continuing stay. we very here in as EBITDA market we'll and P&L. sales remote with same as average on our on these momentum looking also our people these believe will meals to as Albertsons the and at positioned weekly trends to share. focused insights our to share, is go demand some forward, in And let more investing to particularly are QX flow-through in me growth the resuming to continuing QX. we on our a serve our and in competitive advantages. and

some and remain We as are the that items seeing continued shifted providing important that elevated strength in of at seafood, were high-end to and beverage pandemic produce food categories meat, sales home. wines, food evidence throughout such

that of our as who Overall, to some take strong. communities successful passing cost want associates in has quarter continuing as are environment QX, upgrading through pandemic. customers and strong competitive saw care to thanks While we more ability the categories, continue extend premium well inflation this And still to as inflation XXX,XXX consumer of our the our entire see generally I is to in we modest and are we throughout team it remained confident indicating to and produce quality higher were continue during my we we rational. results. to in seeing to households the products are approximately

now take your will We questions.

Operator

Thank you.

interest Instructions] the that we session. the question. go first We hearing In from question is question-and-answer from limit one will callers ask you possible, The now yourself Please Heinbockel John to as as of begin Partners. many [Operator ahead. from Guggenheim

John Heinbockel

and secondly belt I and Hi, here. year, the Vivek. you've or invest business? would got XX anything you've what about that would you of And I M&A another, your going now weeks strategically? the got flow don't that either the you may capital, COVID? be secular that organic under more stuff algo, right, to am right like ones or have then dividends additive And like do your like talking free quick but what's in not thought cash there how the out with changed that, think regarding One, that cash to because I'm there? this all to Is know,

Operator

moment having to their now, We they try speakers' me? are not but we're Pardon moment be reconnect seem to line. and that issues for going pause a believe to One I with please. hearing lines. speaking them. technical the I'm

Okay.

We proceed. speakers Please have the again.

Vivek Sankaran

glitches. Hi, everybody, about John, sorry and these

let that few answer secular a basis, On things; very about guys. your a me question I'll consumer, first. trend healthy Sorry one, point John, a to okay.

many, trade cetera. no wines seeing They're our many still items still discretionary meat, traded on store, are et buying in down. We up

home. are it's that eating Second, a at us they more lot clear to

fresh store continues. sales of so the Our and that rest are higher the than

that that comfortable cooking the people driven partly home and continue at will still always home. that that partly I've are and working view from of I a also the people think future point more by are maintained fact into

and know, gone very back bit, up you right. our little last significantly they But interesting what people a still was the traffic strong, anything on but has could I the to see week and are expect over e-commerce. because baskets store to are that the higher our up through e-commerce quarter, dissect store, you'll what's last coming to are you bought it year, everything continues over as So the over is e-commerce week there's transactions year if people went to week be the would small that last

because On can engagement, more John, which those just mean, more things I personalize and data and a we get So, a I'll and are love we same, few things will digital the growth. still them. we growth. can about will say, first lot cash, now our for in do We'll right priorities And invest continue organic be we to our fleet. the focus it's on

this to lot MFCs clear we'll still into is hardware both roll of the that and growth a the continue and the and lot be Balducci's. going We're we out us to there digital it's we'll and that do going be and software side to see on think us Kings I M&As. and to promise matter more and and year put out do we'll on that stronger stores it's a returns will to M&A that, are, of we turning the for better opportunistic we're as side. and energy continue the And

John Heinbockel

Thank you.

Operator

is question Citibank. Paul Please Lejuez go of from ahead. next The

Paul Lejuez

I the prepared about of think end Hi, inflation. of Vivek, thanks a guys. get couple comments remarks, towards your

related on you do pricing? product And over that about how the Just you of your then and seeing does pricing how of in cost side what could what goods private wondering Thanks. might trending the label change the you a deeper it see way with brands if inflation you that that, versus of equation on bit you're balance do to in the little dig of national year? terms think

Vivek Sankaran

pricing Bob, Do and want you on touch will the do I piece? to

Bob Dimond

the saw what in You during cost product to modest X.X% somewhat inflation bet. was we Paul, quarter. X.X%

we a within saw as that slightly continued, reasonable was so increasing range. the And quarter that but still

Vivek Sankaran

but And of to always be year, half our it it that the if can good in I've actually is outlook the back is this that continues that range. with consumer, and it's the when range, it indicated, X% might Yes. strong towards X% I a maintained something into we on leverage especially we get of the that pass gets for I've to be higher a Paul, think through slightly lot business, like

pricing our We to penetration look helps all were us Own when Own good it up. Brands, It – on Now, is a margins. we worried. comes That's gross sign. on Brands

Own nicely. back Brands are but You were going all worried it's decline, coming to where the

Our in always on things. with will price brands. two you make what's of – an crack pricing Own well because with we'll little more compete the And aggressive happening products, be be are pricing which Brands our we can have brands. national One products it pricing to national will where opening the is and it destination just a point we'll some

Paul Lejuez

luck. Thank you. Good

Vivek Sankaran

Paul. Thanks,

Operator

next Our with go question ahead. Short Karen is from Please Barclays.

Karen Short

to couple clarify margin Hi, XQ a thanks appropriate for I were Bob, is very said. what with for much. things of think that had EBITDA said I just that or wanted comfortable was you you'd you XQ. margin the consensus

I to that looking – from a So is margin. X% consensus EBITDA just can what at want would tell I

the to XQ. way trying that the that de-leverage, vaccines is of gross magnitude there's vaccine XQ the I'm sequentially some the about the the obviously XQ between understand XQ change and XQ delta to of contribution on margins. component mostly to what on the were is right to but just So delta think

Vivek Sankaran

Karen. question, great Yes,

You've a portion. the got slight but was income of portion, vaccine part Certainly, it actually – right there. larger the

in go year. you a you going you'll to then as that – back adjustment, happens get five there's back basis And QX that from and a years points down kind throw XX up XXXX QX seasonality difference out, or QX into will, find basis of QX. If points every you pops XX if

other and So is seasonality, on piece the that bigger little just bit normal items. pharmacy a of

Bob Dimond

We're faster. accelerating it QX up because can are we and faster further it go we DUG into go we think pulling And rollout. should

things Karen. of a That's it's so there, right. And combination

Karen Short

in the ask And how go centralization effort, the of then – actually wanted history a rewards worked. wanted kind clarification. And risks of supply of chain. I Thanks. thanks I the always just but for I been I to short-term guess guess risk the just of weigh always centralization, that it's it and because Okay. to benefit, the – longer-term switching kind broadly then hasn't to gears of you

I'm mean, extent you executed that And majority centralization the is assuming benefit to that of vast the is million, way give little it wondering is that on So you then all $XXX margin a color if could that. the I hope. gross

Vivek Sankaran

there And Yes, two that gross about second second new Karen, topics, are think two half help that. different our with productivity the margins. you these More maintained we've if initiatives. initiatives two always of of the half. the It's of year, is coming in because

The our which optimization centers, first around of one how centers on. is rethinking is so supply chain, of network distribution and distribution the

as is different The and on divisions. one major than big CPG buying one as categories national pooling it a spend by these second buying products rather company our

– dollars centralization, think and notion stop sure you the centralization pursue as right. always have. that we've XXX% spent. done knowledge that how side the of how or equal And, thinking it, two time you're happens we've listening pursued to leverage the things. make pure field. been the we short-lived continuing One we're local we do in are the other able We've and of spent initiatives. the get about we to of Now, and people more on one set into We've what has to dollars, One, where people

at teams right. the we to, the where our maintained of and the they start need provide center, they teams in getting those markets, so so leverage that insight, can we've have can that added local We core and knowledge

other it. do. through who worked detail conscious don't want my there, every to we've we and and on we're know the team, – are so people we There side, what through And have been of and very so

me a this question it, good it I'd path. and And do so your Karen, cautious, to be and work one, but then do afraid been this going but down we've we're rather where to is that's

Karen Short

That's Thanks very helpful. much. Okay.

Operator

Mushkin question ahead. go RX Scott with Capital. is next Your from Please

Vivek Sankaran

Scott?

Operator

Mr. Mushkin, is open. your line

Okay, move. we should

Vivek Sankaran

Go to the next question.

Operator

next to Fargo. caller caller. on The with go move next ahead. is the Please Wells Kelly Edward We'll

Vivek Sankaran

Hello, Ed.

Edward Kelly

margin. to Hi, to the back morning. go guys. wanted Hi, gross I Good guys.

the like we two points year just on strong. a of is basis we the it same about XX if QX, basis then way about Can terms I gross similar, perspective the performance step you in ultimately you've sustainability seems obviously of should a post-pandemic think more unpacking I and picture fades? back, mean, do as And you the just Your up take ID this expect we started a pre-pandemic, like. is margin were we And drivers that of an much of color how sort comparison that? bigger off bit from versus this to and a provide similar then trend? think do of how think think

Bob Dimond

the it first Okay, I'll of take half here.

As far it's here. XX things the made several relative as basis of improvement really up point to XXXX,

have had We improvement. a tremendous shrink

talked helped on them, several Brands. about that, we've well that initiatives of addition to already bit that a the that in we've addition In Own some out as one being productivity have also as but us little had to we've had call promotions improvements efficiency

mix higher and it. rebounded Our up Own as that back has has gross margin a Brands to know you

has as been growing well. mix fresh also Our that

year strange work in were be be are up kind full flat implies of amount basis versus a which quarter, up as call, guided we felt of forward, margin, because remember, And a points now was our like basis as for we is the that that higher were directionally so and It's last there necessarily all we – to we overall not in XXXX points XX as how roughly support year year conference last gross of those together year. some that might things going XXXX that said far fiscal would you that quarters per be we some going flat kind to to to XXXX XX others. the we'll than

– XXXX. you're of of So anything, off it that I to if it I'd would to adding kind pattern of off pattern

Vivek Sankaran

things, - goods et operational And margin. me earlier about of cost to shrink, cetera. you said lot supply were I to Bob chain of and Ed, gross mentioned What know, continues a what also support

always, store okay. done meals The accretive for gross to margin. program is right in are when We seeking gross tailwinds always the margin,

And so we keep seeking that.

to our Because this other – that to it in you keep for surgically as us flow us is through. expanding right. investing we our is gives intent do bottom us in I tremendous to never will will can but gross get things growth more keep which the the the line, gives drive which means the tell a that chance what price margin be and volume to Now, P&L, clearly business – through and always gives

how that's played. So we

find ideas. seeking us always You'll more

Edward Kelly

And the balance for follow-up got. cash on you plus just billion you've one quick that $X

that you you've that you've – right, but optionality investments, it's it's need. about of the debt do also First, whether real cash cash sponsor balance? about we been talked this How You've more like think haven't whether been sort reduction, like positive than flow around kind something of if we company, the covering stock do lot were $X still a opportunistically about I and past. with really think there? billion owns as Would have in You how to the it? what bought interest happens of just you? am this there to that stock, curious

Bob Dimond

planned back really little Ed, drive We a sales. would of on. bit bit our but on really for pay to eyes may it. as That's bonds We that comes but investing debt priority. of we'll M&A it down little focus a We open business that to the little good do question, do. later keep this our one through had our we year, a so our opportunities, of use have in be just bit

Vivek Sankaran

opportunistic, And will remain Ed. Yes. we

lot And we're doing those focused as we'll more at buying it. opportunities think come, growth. merging transformation we're But organic are the driving potential the in We on now. and there's a right We now do primarily a companies. good

Edward Kelly

Great, thank you.

Operator

is Capital. from go And with Scott RX the Please ahead question next Mushkin

Scott Mushkin

this do me time. this you guys try hear Let's can Hopefully, to again.

Vivek Sankaran

you, Scott. hear can I

Scott Mushkin

Hi.

perfect. Okay,

think And yesterday just question Walmart ask was mean, competitors seems like I phone, talk maybe compared digital. longer-term was other Houston. model in are more Number of want a kind and could I guys keeping understanding correct the thing in don't make I I trying you your there. Anyway much things. my asset I around Then like down ask store to wanted it the know. my is light I interpretation to a omnichannel to answer about, – or environment one, really of shoppable. pursue some to two you a sure to want is I maybe it

in I difficult. fighting pickers the with was just think there shelves is the

two questions So those up. are kind a then I have of and my follow

Vivek Sankaran

Yes.

Because say, Let right? e-commerce as don't would asset light. me business, I I with it question first, second the characterize start our

I begins asset right. think with full-stop, greatest saying store, our it is the

And it say it business, reason that. doing about way our We've got properly. an The When and on the its maniacal fresh better us built do be on to and so, by top, great clean. I manage e-commerce stores. the MFC It's for who offer base is the stores. don't but fresh. nice to got for us. have okay. optionality. smooth got full. it's that MFCs growth, are good service we gives great It's you are that, you every It's assets, ducks about you we asset pretty simple really paddling that I believe And thing build a assets. to the better but is be gives it of MFCs variety is to hard there is The and have this is light, is run And the group e-commerce has more to hard the there It's And day. And Scott, very room we're be to a like paddling those business. labor

pace. at go a can You certain

single You're not making bet. any

the You're making on bets. That's we're every taking. with bet getting making, that. year, passing approach technology we so many, more many And you're you're the that new like

the going side grocery. believe idea model for were are asset of a It's we I going. delivery because We and don't one are truck. yes, the good milk asset-light, the we with a On of heavy right, it,

more are much point we to using point of the deliveries. so And

but So we great running it, which everything everything think that's – how about is rests on always our one priority. number stores,

Scott Mushkin

my EBITDA you get Thanks. Ed about XXXX, distressed try it? a Thanks. That's get think then do in X guys actually stock on And attention bit, doing question, getting your great. kind we're to up? – times can a what management you're Is perspective math, guys you almost that that even Do to of anything think to valuation levels. there think from to that's to was going low I kind you really more my this here that with just little is almost is maybe of under follow-up sitting

Vivek Sankaran

embedded It's you, in value also this. billion – Thank real estate Scott. there's pre-pandemic, about have $XX

agree make quarters we – will and think put difference. agree we We hopefully to up a you. with this you with So, continue like

Scott Mushkin

Thanks guys. right, All very much. Nice quarter.

Operator

The next Goldman from J.P. question with Ken is Morgan. go Please ahead.

Ken Goldman

Hi. Thank you.

in X% still inflation. below well to that successful mentioned range. X% you Vivek, were you're along that You passing

of a expected the than though, You facing more business. they good ago. A the food we is inflation for packaged months couple cover still lot they're companies even said

of seeking Now second talking some with customers. about rounds of them are pricing

of So is It's just general is rounds of pushback in letting your But powerful second been through that for now lot that. to your so maybe what a usual. historically thinking curious, I'm appetite not right through there vendors coming than elasticity I a has sense? some kind driver, more sense you're more? about dealing for for wanted letting back how you're get just asking with your of a to

Vivek Sankaran

it Ken, good morning. Yes, let way. me this put

know on First, in basis, CPG okay. a challenges et that challenges some labor, of it's case cetera. I are facing by transportation, always And in companies case our

have a Brands transparency We also. business. we get – owned tremendous large of because And that, Own

happening And so, what's to costs.

through. our price to you where legitimate increase, requiring we may we'll a and good a X% where – down, and entire partners. something who several our especially goes that. supplier say CPGs is that end legitimate, rarely going X%, it And portfolio is pass increase is to up is and But having yes, do cost always that there we negotiations the recognize it constructive X% up it when and with you despite the we up hearing will when fresh And X% warranted about I have CPG So you such that's of That's have end you're X%, inflation said, X% what with the that And coming a many this component. high in All why to noise together. happens. companies to expect be comfortable feel back the no I a through. of expect but we little passing I half higher in range this it. year. be that question in it to higher, the There's do do about it that,

Ken Goldman

the sense any back the but a of vendors with any major pushing right helpful is just are the That's follow-up. stores? the year? major there? trying I seeing stepping planning know counterintuitive Are quick in there any on, then discounting more Are of you to for some of up signs that and your of now half competitors to spending your going Okay. looking on you're get back in start environment and the a pricing of that's what you're that

Vivek Sankaran

as promotions – at looked just it Remarkably last index and last for as – was for stuff, about I – quarters two the recently, quarters, it same it's the about the Ken. you been the it's last several three same or

two, about have is I the you talked think we elasticity. One

you a the us other things to – football in mind so tend to that other – like harder Gatorade be going a of I or promote to Those keep like just is mean, types supply. supply, – like that. things The tighter anything thing in and beer soda to it's would do in things are or for

So think you're the discipline in seeing I marketplace. the

Ken Goldman

Thank you.

Operator

go Sachs. McShane Kate Goldman ahead. The with next from Please is question

Vivek Sankaran

you. hear we Hello, Kate. can’t Kate,

Operator

Kate line McShane, your is open.

Melissa Plaisance

in? why We'll you don't pick back Kate, up. dial you

Let's to next caller. going the

Operator

Gutman caller next is with go Please Morgan The Certainly. ahead. Stanley. Simeon

Simeon Gutman

you quarter. hope morning. hear Nice can I me. Hi, everyone. Good

Vivek Sankaran

you. Yes, we hear can

Simeon Gutman

Great.

the first my talk want question, to quarter. the So line in top I about

continue the you they're about accelerating share. it And Can Vivek, same back accelerating, moderate early fair? accelerated you go and looks business? that some certainly habits seeing take break talk the forward? like gives at prior that even fuel still why is versus industry we Is you hypothesis the for look the that so quarter? we Why hold during in the – not, adjust would hypothesis seasonality? of looks pricing accelerating? it's And about far. as – you as QX. out like in it post-COVID, that's It confidence should and certainly true that the going So Is COVID taking you look pretty hold. versus things that had stacks on you this and Can It how so like should units now? it's apart you're Are like that

Vivek Sankaran

day I home, me office, so home a companies the and home that where always of office at a back from come right? really more to the that the behavior. two more let to that's the Simeon, let's days and one. go one what believe but one? lasting impact second more the days is first And then Bob, come three days that going model or the substantial finding means impact sustenance to answer driving lasting the is pandemic you the Yes, they of say can of you're work two at – bigger into the to number. or So

to and as to working, that of a different we see see you're as you're especially And that's continues I think mode lunch. and into going in-home breakfast So going substantial. more get consumption, long all

average which know, what at than crazy we happens will open? track people lot outlook, fall? at What how things happens and year. start is the real for this seeing but rates quarter. of a at which higher colleges second adjusted weekly the only fresh that going be the people long you've that really Simeon, and And don't XXXX, don't it on first half, ago look least we saw as some really the strength a it's obviously more store. can't I throughout What the a a that the seeing very basis, dollar test why the because in to positive. well, happens The track sales I'm now a home. are momentum year the thing But Simeon, very our That a on, know down open on so item, more seen relative long rest when and we're how are then for really the we okay, were when more will ID traveling – cooking seeing in an I know. one pretty you basis I basis, it you things and on on quarter especially hold, is because seeing that you're see our trends schools when pattern And sales last, but little first second can The when solid I'm in

So...

Vivek Sankaran

right? Consistent,

Bob Dimond

quarter. into prepared second our continue the remarks, said at to much we as we see we in as the quarter right. level saw in And That's same the first that

very on where we're are optimistic So going. sales

Unidentified Analyst

Thank you.

Operator

McShane caller go Kate next ahead. Sachs. Goldman is from The Please

Kate McShane

me? Can hear Hi. Good you morning.

Vivek Sankaran

Yes, Kate.

well. hear Sorry you we about the but technical can staff,

Kate McShane

data comes last comes to marketplaces? related to at Okay. partners wanted just does I just to it how do to in Good. follow-up question ultimately, mean problem what mean the And using that of all. what I And the the third-party just just when it that many finally, does it for fulfillment. when third-party looks terms and it delivery other wondered, fulfillment. like digital is fulfillment No piece, third-party profitability? have these ultimately on what

Vivek Sankaran

Yes.

So the the of fastest-growing it me with excited an last top last two are of Go, than the Up & everything, and service. buckets. & that's the have recognize growing more our do allows growing that play is expansion customers of on do the And year, is purely really Go, a split It for business is the Up for into than us Drive Drive and anything third-party stations. that, we're One the it's Kate, efficiency because using are faster that ordering let about And rate and in mile. we a There's – where Up entire speed. through second We Drive us, to right? part we business right?

have that's Then delivery. customer two-hour the part the is eCommerce, in getting notion it second the where picking in and can done And business third order a the of it. of is we the So believe You we speed and delivering right? a in who get the in part. third-party store

both. using shopping want, multiple shopping And right? in many both our great of – And really, are most customer that customers are of And best – customers that meet the are are where And business, we our our going we're locations. philosophy stores that's there is the of and so our customers The they and part partners. in-store. online to

shopping for living. third-party is works customer the including it think the everybody, I when where to we So are proximal

the So of that maintain is and in are And transparency programs continue and around have for so knowledge doing the are we more more we in buying. that is to and what customer that us. works relationship data engaging what the we loyalty that

of end that in So at on think focus parts. three many customer it day, in And I reaching we'd ways. look the at many, different just we'll the

Kate McShane

you. Thank

Operator

question next Please go is Michael Evercore. with ahead. from Montane The

Michael Montane

good question. Thanks morning. the Hey, for taking

XX% I positive. and XX.X% like Just then two-year, decline and traffic you share the is ask sales ID the wanted traffic what on if sound was, it could all split tickets if to could did

important and I to that's up So to thought tease an point then just follow-up.

Bob Dimond

Yes.

of First is of down basket course. the up, although all, or transactions a little bit, customer count is

stores we're back So a strong that. seeing see some of And real People to are than more we're ago coming year But the certainly. thing. well. where and seeing as we that volumes they positive as sales were a

Vivek Sankaran

are traffic Michael, transactions it – is Yes. online nice count that would over but store, right? interesting the see also And what's over been the last the last to it's is transaction the expect you in store both count quarter. quarter, in and up online

and dropping, given of much year. it's which really was matter baskets last would how So up of stock you also there expect a

Michael Montane

can And multichannel. that you respect you I to business Okay. as it I the think or the rates Is equal get to good sense. any when follow-up that Vivek grow was share flow-through some and just continues Bob? and in compare I you've through. and get color would of mortar there kind with think, to a flow kind core wanted how brick then a it above That pathway traction, handle on of the had to makes just And seen to about

Bob Dimond

improving & Yes. Go been incremental Up indifferent. into on that getting at will be Certainly along, that. we Go. DUG & our And Drive more Up an and we growth we're a as more Drive I'll basis is and our can start where volume And move probably day our here. as see biggest has

of going as we Go incremental that mile, be the can as delivery, be to Up piece ever always see cost. & that As other far to be I that as going Drive don't is going that something know that's that's or profitable it to an that

Vivek Sankaran

media to platform. of so what later towards year the then re-launching you Michael, do, are – And end our you if like year this we Right. in the

getting what about. you and engagement we're profit and so sources customer, with excited more And more and that's of you're because find revenue digital other that

that's is So see far the avenues this. other opens more getting you, think a logistically digital if about pretty MFC cost is I we where the and then you think the how you yes e-commerce, a little curve up but engagement get there And finally, down that road more start for intensive, scenario down.

feeling the levers I can ago, it – we're to if years a two of lot e-commerce maybe side to make call seeing compared indifferent, the that. So business more

Michael Montane

you for Really the interesting color. Thank stuff.

Operator

Ohmes is America Securities. Our Bank go of with question Please next from ahead. Robbie

Vivek Sankaran

Robbie. Hi,

Robbie Ohmes

can me? is, hear question My Hi. you

Vivek Sankaran

Yes.

we can. So

Bob Dimond

Excellent.

Robbie Ohmes

you you and do does doing some pricing maybe where wanted I do vaccines you just Excellent. you share I a within perspective on better apologize. Do role dialed things of but market think, to if or share were your miss think what and you and right It think was so like coming? and quarter. call, that gained relative doing the is think you look I biggest driver? Simeon's the things I Hey you I played Do Is question. in the stocks, that? so, with think were this in market did follow-up, from

Vivek Sankaran

on food, all how share in are of the but food. you decompose two-year If so We're Less where market it if share? gaining that compare and the and you also holding of lot – MULO, we a you if MULO in share at in to a gaining other basis, market look includes world we're channels. market it of

to think I have of greater one rest on our in have share purchases fresh, a the – store. we market keeping seen the the index because we we're relative

I more fresh often the think, are are are I for because share. people back transactions transactions up So coming told market the helps with that you – us the and up

shopping them. proud kept flexible who the a us – vaccines, of tell of and Once with So it. of okay? did the we a how customers on vaccines. of how team got are on in component some that's you, what creative team We our we're our the that, weight of we we interestingly again, proud was – above tells and punched We I'll was. did clearly on are not lot we just

it scheme So things, food traffic of the Robbie, in grand drove the wasn't that our vaccination market sales total share.

I e-commerce great having stores business more think fundamental and beginning and operations running this to hum. it's

Robbie Ohmes

great. on a Congrats That's great quarter.

Vivek Sankaran

you, Robbie. Thank

Operator

Katai go Bank. Krisztina is Deutsche ahead. The next from with Please question

Krisztina Katai

congrats morning, and Hi great guys. on Good quarter. a

Vivek Sankaran

Thank you.

Krisztina Katai

I I market results good stack. a gain that up there the to like really wanted share again, continue guess two-year follow to in on you

So evolved expectations, be to to compared a as curious that going you promotional just is on that of I has gains question year? to how from strategies. your your the really, was first started quarter throughout some a share And lapping last follow-up those

talked promotion. being with You surgical about lot more a

you newer an share, And these have I us the that to maybe if the of give that's XX So over update the to XX was to on behavior on made? interesting there's have that of curious some see could customers acquired you months you progress anything months? last

Vivek Sankaran

Yes.

XX% was last I market gains, share first our think, year ID. the had – So quarter last we

like And very market strong market quarter the I've that week been and a and lapping pleasantly we've every share at we're frankly, it's top So both of we I that we have steady. gains okay. steady. are been and feel gaining we holidays quarter surprised share it – quarter, in on won one, been we look

the And new seeing customers They what the us smaller there the our of and are in, e-commerce so on a you some more in, – of broad the With we – had also we're think we on customers, you is vaccinations lot about, I through a we who I regard we lot a in behaviors. brought customers behaviors. about that most customer behaviors, that's coming about we're that. we the a excited behavior customers to are brought The that brought the customer us, customer in engage lot more with store. those I'd in question with that e-commerce the good brought or and feel through that's then portion through with message spend mean and give

other? Promotions. yes. one to You had though; Yes. Promotions, another question give

things. our have fewer is you'll a we around couple One you If promotions. look that of notice markets,

Our you have promotions physical smaller, flyers more and to of promotions that And at of you that our you'll the see are more the what a gone are go of see you'll see individual. digital, least when personalized so side digital.

we technology and which from digital makes so a notion being have, fully then reach don't surgical now of is that waste better. promotions, sure and And that And we that only perspective. about that's the underlying this promotion getting talked broad we've that implemented is so

Krisztina Katai

a follow-up it. And then on question sales. had helpful. That's Got I digital

but So the still decelerate strong, the quarter. versus did two-year it was stack fourth very

expectations going forward your for So are the year the this if my you're two around kind And of a of expecting the coming balance is question as what store? level stack year. back consumers is now, on to increasingly basis

Vivek Sankaran

our think, and are Traffic a XXXX. want I over in from break up, drive-up just go take even business of – to is that let's down two-year couple be growing away stack. is growing that sure the there grew you are e-commerce still I XX%. components still

in very, seeing you're uptick XXXX. QX basket is a what significant very So relative to

as did. look same if people baskets smaller which buying down, panic way, will You've through that not keep okay? and they the got is suspect seen that the up you year you remember what the traffic, the went come like why numbers is happen I ended

think is these numbers up I positive. traffic the you'll coming because still staying see back

Krisztina Katai

you Thank much. so Great.

Operator

is Please Robert question from next Moskow with go Suisse. Credit The ahead.

Vivek Sankaran

Robert. Hi,

Robert Moskow

so if about wanted know, little kind I, the of it as a to looks for could been question. Vivek share your MFCs. cautious. bit like what to approach I Thanks on outsider, have far Hi. this an is you your learning’s'

kind learning. testing You're and of

pose? effectiveness you the the it operational they give And can challenges have what you? are learned So about what

Vivek Sankaran

Yes.

So you're right.

that a the that what learning is sense and connect core, of so tail astray, fast the trying the you're can items the it customer the the in the of operate and all special in specialness moving cut a you of cautious in are first MFC much pick to do trick and a can as the you you've then But the lose flowers, store what's part the as MFC trying from got to the how pick so MFC, store, don't to store. in middle pick or you We on. what from to really bouquet of from your on you're it recognize happening of that store, of to give meat

There's you also on learning do do on there's continues And system you learning MFC the lot the to to six, algorithm covering of The that. how overall increase the lot has you lot there's not of in store that. learning learn stores. the system. store? of by that How optimize first, a of do software if So the integrate seven one business integrate So Because you're orders? mix, rest to the for with on. so and a in just connect it's curating the How can think inventory it? is pick a so you about the ordering time that especially

So a of we're learning lot those things.

complete should we're We've to store. a not a connected learning things are these options going We're fit going to different right? to configure is one second open we through dark there exploring a so markets. We're So whether The and another in it. are how to different different that's got store. two open that connected one,

going to And the test have have I of this start we think year. enough to we're learned a scaling quickly. through prototypes rest so we that And then few that can

a that's is and no base hundred I nice store, still the going optionality. the the have talked about this the it – So by of is the scale, gets out. to to time business punch quickly these the because thing with sufficient growing journey out it and it's we're Robert, figured we'll the There's need of to, about that

Robert Moskow

And exercise here. follow-up more Got I'll it. one

your What stores it. you're to be bit from sure at across and M&A, deal you want of seeing lifeline flow you coming a regional that active said very of in that their got terms COVID, good These desk? sales good. a in You are are I'm

that opportunities it or is does to buy there's different So that mean fewer than that?

Vivek Sankaran

deal I flow is it – that think put was let The way. higher me it Yes. pre-COVID,

I modernize every good opportunity to our come. become we’re because data, extremely technology be learn aspect how how leverage gives to to business, going the of a And us think tremendous surgical. learn have to personalized everywhere, And patient. actually, to think will to our and learn opportunities that’s customer I it apply how

more do even get can when we we it. that synergies so And

to that’s So how business. we’re being build patient, we’re going continue our and to

Robert Moskow

Okay, great. Thanks for that questions.

Melissa Plaisance

Okay.

Albertsons Companies (ACI) 30 Jul 212021 Q1 Earnings call transcript