Albertsons Q4 2020 Earnings Call Summary (NYSE: ACI)

Prepared Remarks Summary

Financial Results Q4 2020:

• Sales: $15.8Bn (+11.8% in identical sales).
• Gross profit margin: 28.9%.
• Ajd. EBITDA: $917MM (+30% YoY).
• Ajd. Net Income: $347MM
• Adj. Diluted EPS: $0.60 (vs. $0.33 Q4 2019).

Financial Results FY 2020:

• Identical sales: +16.9%.
• Adj. EBITDA: $4.5Bn.
• Adj. EPS: $3.24.
• “We are emerging from this crisis more digitally focused, both in-store and online, and elevating the service our customers expect, while at the same time, being more productive and doing so delivering more profitable growth.” — Vivek Sankaran, President and CEO

Guidance:

• Identical sales on a 2-year stacked basis: +9.5–11%.
• Adj. EBITDA: $3.5–3.6Bn.
• Adj. EPS: $1.95–2.05.
• CAPEX: $1.9–2Bn.

Cash Flow FY 2020:

• Operating free cash flow: $2.3Bn.
• CAPEX: $1.63Bn.
• Genertaed $161MM from asset sale.

Balance Sheet FY 2020:

• Reduced debt by $400MM, and refinanced remaining debt, saving $77MM of interest expense on an annualized basis.
• Net debt-to-adj. EBITDA: 1.5X.
• Repurchased $119MM of stock.
• “We further strengthened our financial position. We’ve generated strong free cash flow, allowing us to accelerate investments in initiatives that will support future growth, reduce debt, pay our dividend and repurchase shares. And through debt reduction and refinancings, we have truly transformed the balance sheet, and we are approaching the future from a much stronger position.” — Vivek Sankaran, President and CEO

2020 Customer Highlights:

• Just for U membership: 25.4MM members, 93.1% retention rate.
• The program continued to accelerate, up 20% YoY.
• Just for U members spend 2.6X more than non-registered customers.
• Actively engaged customers up 10%. These spend 5X more than non-active customers.
• Identified 11MM more households shopping in stores, allowing for a better understanding of their purchasing habits.
• Ended the year with 3X more omnichannel households.
• Customers that moved to omnichannel increased their spending 20%.

Strategic Priorities:

In-store excellence.

• Being a one-stop shopping experience has remained a key differentiator.
• Own Brands portfolio continues to gain traction driven, by the introduction of new innovative products and focus on divisions that were historically underpenetrated. Gross margins are 1,000bp higher than national brands, which increases flexibility.
• Launched over 1,200 items in FY 2020.
• Opened 9 new stores and completed 409 upgrades and remodels.

Accelerating digital and omnichannel capabilities.

• Digital sales growth accelerated to 282% in Q4, with growth of 258% of the full year.
• Drive Up & Go grew 1,000% in Q4, 865% in 2020.
• Launched 343 new DUG locations in Q4, bringing the total to 1,420.
• Expect to have DUG in 2,000 stores (98% coverage) by end of FY 2021.
• Leveraged loyalty program to provide exclusive events like virtual cook-alongs.
• Shifted delivery at many of our locations to third-party logistics providers to improve speed and lower costs.

Driving productivity.

• Achieved $500MM in gross productivity savings in FY 2020.
• Expect to exceed the goal of $1Bn in gross savings by end of FY 2022.
• Cumulative savings target of $1.5Bn.

Strengthening talent and culture.

• Adding talent in key area, like the newly hired Chief Data Officer.
• Administered 3.1MM COVID vaccines.
• Access to vaccines is now live at 100% of locations

Insights on the first 7 weeks of FY 21:

• Sales are trending at approximately the same levels as Q4 on a seasonally adjusted basis.
• Continued strength in sales of items elevated throughout the pandemic, such as meat, seafood, produce, eggs, breakfast cereal and high-end wine.
• “While food-at-home inflation is still at recent high levels and could be sustained at these levels for some time, we have planned our business assuming inflation of 1% to 2% this fiscal year.” — Vivek Sankaran, President and CEO

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