Boise / ID. (abc) Albertsons Companies reported results for the fourth quarter of fiscal 2022 and full year fiscal 2022, which ended February 25, 2023.
Fourth Quarter of Fiscal 2022 Highlights
- Identical sales increased 5.6 percent
- Digital sales increased 16 percent
- Loyalty members increased 15 percent to over 34 million
- Net income of USD 311 million, or USD 0.54 per share
- Adjusted net income of USD 460 million, or USD 0.79 per share
- Adjusted Ebitda of USD 1,050 million
Fiscal 2022 Highlights
- Identical sales increased 6.9 percent
- Digital sales increased 28 percent
- Net income of USD 1,514 million, or USD 2.27 per share
- Adjusted net income of USD 1,965 million, or USD 3.37 per share
- Adjusted Ebitda of USD 4,677 million
«We are pleased with our fourth quarter financial results and the suite of capabilities we continue to build in our business,» said Vivek Sankaran, CEO. «We want to thank all our teams for their commitment to bringing people together around the joys of food and inspiring well-being, and for serving our customers and communities.» Sankaran continued, «These results, and our results for fiscal 2022 overall, were fueled by the rollout of our Customers for Life transformation strategy, which places the customer at the center of everything we do, with the ultimate goal of supporting them every day, every week, and for a lifetime. Against this backdrop, throughout the year, we invested in the following initiatives: digitally connecting and engaging our customers through a frictionless omnichannel experience, differentiating our store experience, enhancing what we offer and where we offer it, modernizing our operational capabilities, and further embedding ESG throughout our operations.»
«As we look ahead to fiscal 2023, we believe we are well-positioned to drive top-line growth by deepening relationships with our customers even as inflation continues. However, we also believe that the economic backdrop is uncertain and is likely to be more challenging later in the year. We have prepared our business for a more difficult consumer environment, and are expecting significant labor investments and inflationary cost increases. Additionally, we expect further declines in COVID-19 vaccination and at-home test kit revenue. These headwinds are expected to be partially offset by the ongoing growth in our core business and the benefits from the next phase of our productivity initiatives.»
Fourth Quarter of Fiscal 2022 Results
Net sales and other revenue was USD 18.3 billion during the 12 weeks ended February 25, 2023 («fourth quarter of fiscal 2022») compared to USD 17.4 billion during the 12 weeks ended February 26, 2022 («fourth quarter of fiscal 2021»). The increase was driven by the Company’s 5.6 percent increase in identical sales, with retail price inflation, growth in pharmacy and increasing digital penetration contributing to the identical sales increase.
Gross margin rate decreased to 27.8 percent during the fourth quarter of fiscal 2022 compared to 28.7 percent during the fourth quarter of fiscal 2021. Excluding the impact of fuel and LIFO expense, gross margin rate decreased 71 basis points compared to the fourth quarter of fiscal 2021. The pharmacy business drove approximately half of the rate decrease with the remaining decrease being the result of increases in product, shrink, supply chain and advertising costs, as well as increases in picking and delivery costs related to the continued growth in digital sales, partially offset by the benefits of ongoing productivity initiatives. The decrease related to the pharmacy business was primarily due to fewer COVID-19 vaccinations in the fourth quarter of fiscal 2022. We administered 0.4 million COVID-19 vaccinations during the fourth quarter of fiscal 2022, compared to 2.3 million during the fourth quarter of fiscal 2021.
Selling and administrative expenses increased to 25.8 percent of Net sales and other revenue during the fourth quarter of fiscal 2022 compared to 24.9 percent during the fourth quarter of fiscal 2021. Excluding the impacts of fuel, withdrawal from the Combined Plan (as defined herein) and a legal settlement in the fourth quarter of fiscal 2022, Selling and administrative expenses as a percentage of Net sales and other revenue was essentially flat. The benefit of our ongoing productivity initiatives, as well as lower appreciation pay and lower COVID-19 related expenses offset higher employee costs, higher utilities costs, incremental merger-related costs and continued investments related to the acceleration of our digital and omnichannel capabilities.
Net gain on property dispositions and impairment losses was USD 61.4 million during the fourth quarter of fiscal 2022 compared to USD 1.7 million during the fourth quarter of fiscal 2021.
Interest expense, net was USD 91.6 million during the fourth quarter of fiscal 2022 compared to USD 108.0 million during the fourth quarter of fiscal 2021.
Other income, net was USD 9.5 million during the fourth quarter of fiscal 2022 compared to USD 47.5 million during the fourth quarter of fiscal 2021.
Income tax expense was USD 40.4 million, representing an 11.5 percent effective tax rate, during the fourth quarter of fiscal 2022, compared to USD 148.7 million, representing a 24.6 percent effective tax rate, during the fourth quarter of fiscal 2021. The favorability in the effective tax rate was the result of certain statutes expiring in the fourth quarter of fiscal 2022 and the related reduction in reserves for uncertain tax positions.
Net income was USD 311.1 million or USD 0.54 per share during the fourth quarter of fiscal 2022, which included the USD 43.5 million or USD 0.07 per share benefit related to the reduction in reserves for uncertain tax positions. Net income was USD 455.1 million or USD 0.79 per share during the fourth quarter of fiscal 2021, which included the USD 78.7 million or USD 0.14 per share gain, net of tax, related to the Combined Plan withdrawal.
Adjusted net income was USD 459.7 million, or USD 0.79 per share (which includes the USD 0.07 per share benefit discussed above), during the fourth quarter of fiscal 2022 compared to USD 436.8 million, or USD 0.75 per share, during the fourth quarter of fiscal 2021.
Adjusted Ebitda was USD 1,050.2 million during the fourth quarter of fiscal 2022 compared to USD 1,073.7 million during the fourth quarter of fiscal 2021. The decrease in Adjusted Ebitda was driven by fewer COVID-19 vaccines in the fourth quarter of fiscal 2022. This trend of declining COVID-19 vaccinations is expected to continue into fiscal 2023, in addition to lower COVID-19 at-home test kit revenue, and as a result we expect an approximate USD 200 million headwind to our Adjusted Ebitda in fiscal 2023 compared to fiscal 2022.
Capital Expenditures
During fiscal 2022, capital expenditures were USD 2,153.9 million, which primarily included continued investment in our digital and technology platforms, the completion of 173 remodels and the opening of five new stores.
Merger Agreement
On October 13, 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 stock and convertible preferred stock (on an as-converted basis) for total consideration of USD 34.10 per share, subject to certain reductions including the Special Dividend (as defined below). Details regarding the Merger Agreement and the transactions contemplated by the Merger Agreement can be found in the Form 8-K filed on October 14, 2022 and the joint press release issued by the Company and Kroger on October 14, 2022.
Special Dividend
On January 17, 2023, the temporary restraining order preventing payment of the special cash dividend of USD 6.85 per share was lifted. Details can be found in the Form 8-K filed on January 18, 2023. On January 20, 2023, the Special Dividend of USD 3,916.9 million was paid.
Convertible Preferred Stock
During fiscal 2022, certain holders of the Company’s convertible preferred stock converted approximately 1,349,186 shares of convertible preferred stock into 78,339,120 shares of the Company’s Class A common stock. As of April 7, 2023, the Company has issued, in the aggregate, 98,708,702 shares of Common Stock to holders of convertible preferred stock, representing approximately 97 percent of the originally issued convertible preferred stock. As a result, there are approximately 2,903,200 shares of Common Stock reserved for issuance upon the potential conversion of the remaining 50,000 shares of outstanding convertible preferred stock.
About Albertsons Companies
Albertsons Companies is a leading food and drug retailer in the United States. As of February 25, 2023, the Company operated 2,271 retail stores with 1,722 pharmacies, 401 associated fuel centers, 22 dedicated distribution centers and 19 manufacturing facilities. The Company operates stores across 34 states and the District of Columbia with 24 banners including Albertsons, Safeway, Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets and Balducci’s Food Lovers Market. The Company is committed to helping people across the country live better lives by making a meaningful difference, neighborhood by neighborhood. In 2022, along with the Albertsons Companies Foundation, the Company contributed more than USD 200 million in food and financial support, including more than USD 40 million through our Nourishing Neighbors Program to ensure those living in our communities and those impacted by disasters have enough to eat.
