Albertsons reported in-line results for its fiscal first quarter (ending June 17) with grocery margin up slightly, but consolidated profits and cash flow down due to lower gas prices, merger costs, and higher shrink. The company's comparable-store sales (+4.9%) outperformed the conventional grocery category (+3.3% per the Census Bureau’s Retail Sales data) but was less than inflation (food at home consumer price index +5.9%) which reflects trade-down into Albertsons private brand, trade-over to produce (where inflation is lower), and channel shift by consumers into mass, club, and deep discount/value grocers like Grocery Outlet.
As shown below, Walmart is comping at 2-3X the rate. That trade-down and shift is also seen in scanner data, which for mid-June shows private brand share up and branded volume down (down more than -3%). (Households are not consuming 3% fewer calories.) Scanner data also shows that produce volume (i.e., the store perimeter) is also up.
The search for value can also be seen in Albertson’s very strong +1.9M additions of loyalty program households to 35.9M. That gain is nearly double the similar periods in 2021 and twice that of 2022. Moreover, the gains are coming on an ever higher base implying that they are more deeply penetrating their trade areas. One of the ways that they are doing so is by offering shoppers greater relative value. The earnings release noted "incremental price investments" which is the first time such language has been used in their earnings release in several years.
Placer.ai shows Vons, Safeway, and Jewel-Osco as the outperforming banners in traffic during the quarter of Albertsons Inc. portfolio of brands. However, different comparisons influence the year-over-year rates and Albertsons and Vons are down compared to 2019.
Additionally, as we recently wrote, less affluent households are shopping an increasing number of banners to seek out bargains and cherry-pick promotions in an effort to stretch their dollars. Consequently, basket size (units) is declining. Looking at just Safeway, the largest banner in Albertson’s portfolio at 894 locations, and visits and visitors by frequency-of-visit we see little dispersion in activity by lower frequency shoppers (less than 15 visits during the most recent quarter). We do see a larger visitor drop in the 15-19 bucket (-3%) and the third-party gig shopper bucket (30+). We suspect these third-party “shoppers” (-9%) versus customer visits (-3%) are down more as fewer people have third-party side-hustle gigs and have transitioned to a full-time jobs elsewhere. We also think this insight further supports our concern that Sprout Farmer Market’s outsized sales gains from third-party delivery may not be sustainable.