January 14, 2021

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Not just snacks: Albertsons says customers make more trips to buy fresh products

Snacks have proliferated in American grocery baskets during COVID-19.

But Albertsons Cos.
says customers are also visiting its stores to stock up on fresh items, whether meat or produce or flowers.

“We believe that purchases of fresh product drives trips as our loyal customers often stock up on shelf-stable items in one trip, but come back frequently for fresh product,” said Vivek Sankaran, chief executive of the supermarket-chain operator, while speaking on a third-fiscal-quarter earnings call, according to a FactSet transcript.

See: Target’s holiday sales show the importance of stores even as COVID-19 drives business online

According to the Frito-Lay Snack Index released in November, consumers have been snacking more during the pandemic.

“Consumers have shifted their behavior with 58 percent snacking more since COVID-19,” said Mike Del Pozzo, senior vice president of sales and chief customer officer at Frito-Lay North America, in a statement.

Frito-Lay is a unit of PepsiCo Inc.

Two-thirds of respondents to the survey of 2,200 adults polled for the index say they’re keeping more snacks in the house than they were before the pandemic.

Still, according to Albertsons chief Sankaran, identical sales for fresh items is higher than average.

“In Q3, our most loyal shoppers increased their average spend on fresh [items] 200 basis points compared to the average in-store total spend the prior year and continued to visit our stores over two times a week, with nearly three out of four trips including fresh,” he said.

“Fresh has also been a catalyst in omnichannel, as fresh items, including our high-quality meat and produce, have increased in the basket compared to pre-pandemic levels.”

Albertsons, which went public in June 2020 and also encompasses the Safeway, Jewel-Osco, Star Market, Vons and Tom Thumb chains among others, reported third-quarter earnings that beat expectations and raised full-year guidance. The stock has gained more than 11% over the past month and nearly 16% over the last three months.

The S&P 500 index

is up 8.8% over the last three months.

Also: Walmart testing grocery delivery technology with HomeValet ‘smart box’

“We think investors are overestimating the rate that food-at-home demand moderates in 2021 and that Albertsons’ strong fresh offerings (41% of sales vs. Kroger’s 24%) combined with recent reinvestments and strong execution will drive better-than-anticipated sales/earnings next fiscal year,” said Arun Sundaram, equity analyst at CFRA, in a note.

CFRA rates Albertsons stock strong buy with a $22 price target.

Albertsons shares only gained 2% after the better-than-expected earnings. JPMorgan commented on Albertsons’ lackluster stock performance despite the results.

“At almost any other time in our 17 years covering food-at-home, this Albertsons print … likely would have sent the shares significantly higher,” analysts said.

JPMorgan said there are investor concerns about negative comparable sales and margins.

But JPMorgan rates Albertsons stock overweight with a $20 price target.

“We believe Albertsons is an improving company in a food-at-home industry that should stay robust for longer than many observers anticipate.”

MKM Partners, like investors, is wary.

Watch: How to pick winners in the retail sector amid the pandemic

“We worry that the grocery industry will face multiple years of foot-traffic headwinds, with restaurants reopening, but doing so less gradually than initially expected,” Bill Kirk, MKM executive director, wrote in a note.

“With that backdrop, we expect pricing to get very competitive and gross margins to be pressured.”

MKM rates Albertsons stock neutral with an $18 price target.


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Mohamed Mohamoud

Author and the owner of idman news

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