Albertsons Closes Q3 2018 with High Sales; Cites Impacts From California Fires and Romaine Recall
- by Melissa De Leon Chavez
BOISE, ID - The third quarter of fiscal 2018 was not without its challenges, as retail giant Albertsons Companies, Inc., stated when it included the industry-wide romaine lettuce recall and the California fires among events that impacted its performance. Despite these points, President and CEO Jim Donald shared key successes for the chain.
"We continue to gain traction in our efforts to deliver a seamless shopping experience for our customers in both the four-wall and no-wall environment," said Donald. "The third quarter marked our strongest identical sales increase since the first quarter of fiscal 2016. Identical sales grew for the fourth consecutive quarter, and Adjusted EBITDA grew over 50% compared to the same quarter last year, as the business has rebounded from fiscal 2017. We achieved a record high sales penetration rate on our Own Brands products as we continue to delight our customers with our portfolio of award winning brands."
The details of the highlights named in the financial report included:
- Identical sales increased 1.9%
- Adjusted EBITDA increased over 50%
- An e-commerce sales growth of 73%
- Own Brands sales penetration increased to an all-time high of 25.2%
- Completed refinancing and $1 billion paydown of term loan facility
- Fiscal 2018 Adjusted EBITDA updated to be in the range of $2.65 billion to $2.7 billion
"We also successfully refinanced our term loan and asset-based loan facilities during the quarter as we secure long-term financing and deliver our balance sheet," Donald added.
Q3, which ended December 1, 2018, encompassed 12 tumultuous weeks in regard to some of California's worst wildfires and the CDC and FDA’s advisory having recommended all romaine lettuce be pulled from shelves. Even the recent earthquake in Alaska played a part in its financial results, Albertsons said.
Given the company's recent sale and leaseback of five distribution centers, not to mention two additional facility leasebacks earlier this year, the retailer also said that fiscal 2018 results are now expected to be impacted by approximately $17 million in incremental rent expense.
Collectively, Albertsons said it believes these items will negatively impact its fiscal 2018 Adjusted EBITDA margin by approximately 10 basis points and has updated its full fiscal 2018 identical sales guidance to be in the range of 0.8% to 1.0% and its Adjusted EBITDA guidance to be in the range of $2.65 billion to $2.7 billion.
In addition, the company expects the following results for the full year in fiscal 2018:
- Interest expense to be slightly down to relatively flat
- Its effective tax rate to be in the range of 29% to 30%, excluding one-time asset sales and discrete items
- To spend approximately $1.4 billion in capital expenditures
Gross profit margin increased to 27.8% during the third quarter of fiscal 2018 compared to 26.7% during the third quarter of fiscal 2017, which Albertsons said was primarily attributable to improved shrink expense as a percentage of sales, lower advertising costs, improved penetration in Own Brands, and the realization of the company's cost reduction initiatives. To read the full detailed report, click here.