Boise / ID. (abc) Albertsons Companies reported results for the second quarter of fiscal 2022, which ended in Idaho’s City of Trees on September 10, 2022. Second quarter of fiscal 2022 highlights:
- Identical sales increased 7.4 percent
- Digital sales increased 36 percent
- Loyalty members increased 16 percent to 31.8 million
- Net income of USD 343 million, or USD 0.59 per share
- Adjusted net income of USD 418 million, or USD 0.72 per share
- Adjusted Ebitda of USD 1,049 million
«Our team continued to deliver strong performance during the second quarter,» said Vivek Sankaran, CEO. «Throughout the quarter, we continued to invest in our digital transformation, our differentiation in Fresh, and the modernization of our capabilities. As we look ahead to the balance of the year, we believe we are well-positioned to further accelerate in each of these areas, as we continue to roll out our Customers for Life strategy. With ongoing productivity to support our investments and to cushion inflationary and consumer headwinds, we will continue to prioritize our investments in deepening our relationships with our customers and communities. Our teams’ commitment to serving our customers is driving our performance while furthering our purpose to bring people together around the joys of food and to inspire well-being.»
Second Quarter of Fiscal 2022 Results
Net sales and other revenue was USD 17.9 billion during the 12 weeks ended September 10, 2022 (Q2-2022) compared to USD 16.5 billion during the 12 weeks ended September 11, 2021 (Q2-2021). The increase was driven by the Company’s 7.4 percent increase in identical sales and higher fuel sales, with retail price inflation driving the identical sales increase.
Gross margin rate decreased to 27.9 percent during the second quarter of fiscal 2022 compared to 28.6 percent during the second quarter of fiscal 2021. Excluding the impact of fuel and LIFO expense, gross margin rate decreased 43 basis points compared to the second quarter of fiscal 2021. The decrease was primarily driven by increases in product and supply chain costs, increases in picking and delivery costs related to the growth in digital sales, and fewer Covid-19 vaccines in the second quarter of fiscal 2022, partially offset by the benefits of ongoing productivity initiatives.
Selling and administrative expenses decreased to 25.0 percent of Net sales and other revenue during the second quarter of fiscal 2022 compared to 25.6 percent during the second quarter of fiscal 2021. Excluding the impact of fuel, Selling and administrative expenses as a percentage of Net sales and other revenue decreased 31 basis points. The decrease in Selling and administrative expenses was primarily attributable to the benefit of ongoing productivity initiatives, together with lower Covid-19 related expenses and sales leverage, partially offset by investments related to the acceleration of the Company’s digital and omnichannel capabilities, market-driven wage rate increases and higher depreciation and amortization.
Net gain on property dispositions and impairment losses was USD 14.0 million during the second quarter of fiscal 2022 compared to USD 0.2 million during the second quarter of fiscal 2021.
Interest expense, net was USD 89.8 million during the second quarter of fiscal 2022 compared to USD 109.3 million during the second quarter of fiscal 2021.
Other income, net was USD 18.9 million during both the second quarter of fiscal 2022 and the second quarter of fiscal 2021.
Income tax expense was USD 117.4 million, representing a 25.5 percent effective tax rate, during the second quarter of fiscal 2022 compared to USD 100.3 million, representing a 25.4 percent effective tax rate, during the second quarter of fiscal 2021.
Net income was USD 342.7 million, or USD 0.59 per share, during the second quarter of fiscal 2022 compared to USD 295.2 million, or USD 0.52 per share, during the second quarter of fiscal 2021.
Adjusted net income was USD 418.3 million, or USD 0.72 per share, during the second quarter of fiscal 2022 compared to USD 369.5 million, or USD 0.64 per share, during the second quarter of fiscal 2021.
Adjusted Ebitda was USD 1,048.5 million, or 5.9 percent of Net sales and other revenue, during the second quarter of fiscal 2022 compared to USD 965.4 million, or 5.8 percent of Net sales and other revenue, during the second quarter of fiscal 2021.
Recent Developments
On October 13, 2022, as disclosed in an 8-K filed on October 14, 2022, the Company entered into an Agreement and Plan of Merger with The Kroger Company and Kettle Merger Sub, Inc. Under the terms of the Merger Agreement, Kroger (through Kettle Merger Sub, Inc.) will acquire all of the outstanding shares of the Company’s common and preferred stock (on an as-converted basis) for an estimated total consideration of USD 34.10 per share. Details regarding the Merger Agreement and the transactions contemplated by the Merger Agreement can be found in the 8-K filed on October 14, 2022 and the joint press release issued by the Company and Kroger on October 14, 2022. As part of the transaction, the Company will pay a special cash dividend of up to USD 4 billion to its stockholders. The cash component of the USD 34.10 per share consideration will be reduced by the per share amount of the special cash dividend, which is expected to be approximately USD 6.85 per share. This cash dividend will be payable on November 7, 2022, to stockholders of record as of the close of business on October 24, 2022.
In addition, as disclosed in an 8-K filed on October 17, 2022, the Company entered into extended lock-up agreements with entities affiliated with five of its largest stockholders (Cerberus Capital Management, L.P., Kimco Realty Corporation, Klaff Realty, L.P., Lubert-Adler Partners and Jubilee Limited Partnership), who the Company refers to as its Sponsors, and a lock-up agreement with HPS Investment Partners, LLC (HPS). HPS and certain of the Sponsors were each party to extended lock-up agreements which were due to expire on October 18, 2022. Details regarding these lock-up agreements entered into with the Sponsors and HPS can be found in the 8-K filed by the Company on October 17, 2022.
