Albertsons Falls After Sales Growth Slows in the Current Quarter
(Bloomberg) -- Albertsons Cos. fell after saying its sales growth had slowed in recent months, highlighting how demand for food and other essentials has moderated even as the coronavirus pandemic continues to spread.
The supermarket chain’s identical-store sales, a key barometer of a retailer’s health, rose 26.5% in the quarter ended June 20, beating the average analyst estimate. But that growth has slowed to the mid-teens in the current period, Chief Executive Officer Vivek Sankaran said in an interview. The company is still grappling with limited availability of key items like soups, baking products and household cleansers.
Albertsons shares fell as much as 6.5% to $15.06 Monday in New York.
The stock’s decline after earnings likely reflects sentiment that 2020, with its stockpiling and quarantined consumers, is the top of the mountain for grocery stores. In a recent research note, Barclays analyst Karen Short said this year is “as good as it gets” for Albertsons. She said the company’s prices are higher than those at rival Kroger Co., while its e-commerce strategy lags behind peers. Conditions for grocers could get worse if another round of federal stimulus checks doesn’t appear.
“I keep looking for signs of recessionary spending, and we have not seen it yet,” Sankaran said in the interview. “If we see that, it will come in the next couple of months if there is no stimulus.”
There were bright spots in the quarter. Digital sales soared 276% in the period as stuck-at-home consumers increasingly turned to e-commerce. The supermarket chain, whose banners include Safeway and Vons, has said online is a key area of investment, along with developing its own private brands. Gross profit margins also expanded.
The company paid $615 million in coronavirus-related expenses, with almost half of that amount going to employees in the form of “appreciation pay.” Albertsons, like many other companies, said it can’t predict what impact the pandemic will have on its business for the rest of the year. Sales in states hard-hit by the coronavirus in recent weeks, like California and Arizona, have accelerated, Sankaran said.
The report is investors’ first look at Albertsons since its underwhelming public debut last month, in which it sold $800 million of stock. The initial public offering followed a failed attempt five years earlier, when the company planned on raising $1.7 billion before postponing and eventually withdrawing that plan.
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