Boise / ID. (abc) Albertsons Companies reported results for the fourth quarter of fiscal 2021 and full year fiscal 2021, which ended February 26, 2022, and provided a fiscal 2022 outlook.
Fourth Quarter of Fiscal 2021 Highlights
- Identical sales increased 7.5 percent; on a two-year stacked basis identical sales growth was 19.3 percent
- Digital sales increased 5 percent; on a two-year stacked basis digital sales growth was 287 percent
- Net income of USD 455 million, or USD 0.79 per share
- Adjusted net income of USD 437 million, or USD 0.75 per share
- Adjusted Ebitda of USD 1,074 million
Fiscal 2021 Highlights
- Identical sales decreased 0.1 percent; on a two-year stacked basis identical sales growth was 16.8 percent
- Digital sales increased 5 percent; on a two-year stacked basis digital sales growth was 263 percent
- Net income of USD 1,620 million, or USD 2.70 per share
- Adjusted net income of USD 1,781 million, or USD 3.07 per share
- Adjusted Ebitda of USD 4,398 million
«We are pleased with our fourth quarter and full-year 2021 results and the continuing momentum we are seeing as we enter 2022,» said Vivek Sankaran, CEO. «Our strategy is working, and we are executing well against industry-wide pressures. We want to recognize and thank all of our retail, distribution and manufacturing teams for their commitment to and care of our customers and their communities.»
Fourth Quarter of Fiscal 2021 Results
Net sales and other revenue was USD 17.4 billion during the 12 weeks ended February 26, 2022 («fourth quarter of fiscal 2021») compared to USD 15.8 billion during the 12 weeks ended February 27, 2021 («fourth quarter of fiscal 2020»). The increase was driven by the Company’s 7.5 percent increase in identical sales and higher fuel sales, with retail price inflation contributing to the identical sales increase.
Gross margin rate decreased to 28.7 percent during the fourth quarter of fiscal 2021 compared to 28.9 percent during the fourth quarter of fiscal 2020. Excluding the impact of fuel, gross margin rate was flat compared to the fourth quarter of fiscal 2020 primarily due to productivity initiatives, improved pharmacy margins related to administering Covid-19 vaccines and favorable product mix, offset by lower gross margin rates across certain product categories due to the rate impact of increased product costs, higher supply chain costs and an increase in LIFO expense, all driven by the current inflationary environment.
Selling and administrative expenses decreased to 24.9 percent of Net sales and other revenue during the fourth quarter of fiscal 2021 compared to 30.0 percent of Net sales and other revenue during the fourth quarter of fiscal 2020. Excluding the impacts of fuel and the Combined Plan (as defined herein) withdrawal, Selling and administrative expenses as a percentage of Net sales and other revenue decreased 30 basis points. The decrease in Selling and administrative expenses was primarily attributable to lower Covid-19 related expenses and the execution of productivity initiatives, which were offset by higher employee costs, depreciation and other expenses related to the Company’s investments in its digital and omnichannel capabilities and other strategic priorities. The increase in employee costs was the result of additional labor to support the increase in fresh sales, market-driven wage rate increases, incremental front-line associate appreciation pay and higher equity-based compensation expense.
Interest expense, net was USD 108.0 million during the fourth quarter of fiscal 2021 compared to USD 113.1 million during the fourth quarter of fiscal 2020.
Other income, net was USD 47.5 million during the fourth quarter of fiscal 2021 compared to Other income, net of USD 107.2 million during the fourth quarter of fiscal 2020. The decrease in other income is primarily attributable to lower unrealized gains on non-operating investments in the fourth quarter of fiscal 2021 compared to the fourth quarter of fiscal 2020.
Income tax expense was USD 148.7 million, representing a 24.6 percent effective tax rate, during the fourth quarter of fiscal 2021. Income tax benefit of USD 64.1 million, representing a 30.8 percent effective tax rate, was the result of the loss before income taxes which was driven by the USD 607.2 million Combined Plan withdrawal charge during the fourth quarter of fiscal 2020.
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. Net loss was (USD 144.2 million) or (USD 0.37) per share during the fourth quarter of fiscal 2020, which included the USD 449.4 million or USD 0.97 per share charge, net of tax, related to the Combined Plan withdrawal.
Adjusted net income was USD 436.8 million, or USD 0.75 per share, during the fourth quarter of fiscal 2021 compared to USD 347.2 million, or USD 0.60 per share, during the fourth quarter of fiscal 2020.
Adjusted Ebitda was USD 1,073.7 million during the fourth quarter of fiscal 2021 compared to USD 916.9 million during the fourth quarter of fiscal 2020.
Supplemental Two-Year Results
The following table provides a comparison of the fourth quarter of fiscal 2021 and 52 weeks ended February 26, 2022 («fiscal 2021») to the 13 weeks ended February 29, 2020 («fourth quarter of fiscal 2019») and 53 weeks ended February 29, 2020 («fiscal 2019») for certain financial measures, including a compounded annual growth rate («CAGR»), to demonstrate the two-year growth in the Company’s business. The Company believes these supplemental comparisons provide meaningful and useful information to investors about the trends in its business relative to pre-Covid-19 pandemic periods.
| Q4-2021 Supplemental Two-Year Results |
FY-2021 Supplemental Two-Year Results |
||
| Identical sales two-year stacked (1) | 19.3 % | 16.8 % | |
| Net income per Class A common share two-year CAGR | 156.6 % | 83.7 % | |
| Adjusted net income per Class A common share two-year CAGR | 50.8 % | 71.8 % | |
| Net income two-year CAGR | 159.1 % | 86.3 % | |
| Adjusted net income two-year CAGR | 50.0 % | 70.6 % | |
| Adjusted Ebitda two-year CAGR | 19.2 % | 24.6 % | |
| % of net sales and other revenue: | |||
| Gross margin (1) | Increased 10 basis points | Increased 60 basis points | |
| Selling and administrative expenses (2) | Decreased 110 basis points | Decreased 115 basis points | |
| . | |||
| (1) Excluding fuel. | |||
| (2) Excluding fuel and the Combined Plan withdrawal. | |||
Net sales and other revenue was USD 17.4 billion during the fourth quarter of fiscal 2021 compared to USD 15.4 billion during the fourth quarter of fiscal 2019. The increase in sales compared to the fourth quarter of fiscal 2019 was primarily due to the 19.3 percent increase in two-year stacked identical sales.
Gross margin rate increased to 28.7 percent during fourth quarter of fiscal 2021 compared to 28.6 percent during the fourth quarter of fiscal 2019. Excluding the impact of fuel, gross margin rate increased by approximately 10 basis points compared to the fourth quarter of fiscal 2019, primarily driven by productivity initiatives and improved pharmacy margins related to administering Covid-19 vaccines, partially offset by an increase in product and supply chain costs, including LIFO expense, as well as growth in digital sales.
Selling and administrative expenses decreased to 24.9 percent of net sales and other revenue during the fourth quarter of fiscal 2021 compared to 26.5 percent of net sales and other revenue for the fourth quarter of fiscal 2019. Excluding the impact of fuel and the Combined Plan withdrawal, selling and administrative expenses as a percentage of net sales and other revenue decreased approximately 110 basis points primarily due to sales leverage and the execution of productivity initiatives, partially offset by increases in employee costs and other expenses related to the Company’s investments in its digital and omnichannel capabilities and strategic priorities, as well as incremental Covid-19 expenses.
Capital Allocation
During fiscal 2021, capital expenditures were USD 1,606.5 million, which primarily included investments in the modernization of our store fleet, including 236 remodels and the opening of 10 new stores, and the building of our digital and technology platforms. During the fourth quarter of fiscal 2021, the Company paid a quarterly dividend of USD 0.12 per share of Class A common stock on February 10, 2022 to stockholders of record as of January 26, 2022. Today the Company announced the next quarterly dividend of USD 0.12 per share of Class A common stock payable on May 10, 2022 to stockholders of record as of April 26, 2022.
Strategic Alternatives
On February 28, 2022, the Board of Directors of the Company announced that it had commenced a Board-led review of potential strategic alternatives aimed at enhancing the Company’s growth and maximizing shareholder value. The review will include an assessment of various balance sheet optimization and capital return strategies, potential strategic or financial transactions and development of other strategic initiatives to complement the Company’s existing businesses, as well as responding to inquiries. The Board has not set a timetable for the conclusion of this review, nor has it made any decisions related to any further actions or potential strategic alternatives at this time. There can be no assurance that the review will result in any transaction or other strategic change or outcome.
Convertible Preferred Stock
As of April 8, 2022, subsequent to the end of the fourth quarter of fiscal 2021, certain holders of the Company’s convertible preferred stock converted 239,445 shares of convertible preferred stock into 13,903,134 shares of the Company’s Class A common stock («Common Stock») and as of such date, the Company has issued, in the aggregate, 34,272,716 shares of Common Stock to holders of preferred stock, representing approximately 34 percent of the originally issued convertible preferred stock. As a result, there are 67,339,284 shares of Common Stock reserved for issuance upon the potential conversion of the remaining outstanding convertible preferred stock.
Fiscal 2022 Outlook
The Company is providing its fiscal 2022 outlook as follows:
- Identical sales in fiscal 2022 of approximately 2 percent to 3 percent
- Adjusted Ebitda in the range of USD 4.15 billion to USD 4.25 billion
- Adjusted net income per share in the range of USD 2.70 to USD 2.85 per share
- Effective tax rate in the range of 23 percent to 24 percent excluding discrete items
- Capital expenditures in the range of USD 2.0 billion to USD 2.1 billion
The Company is unable to provide a full reconciliation of the GAAP and Non-GAAP Measures (as defined below) used in the fiscal 2022 outlook without unreasonable effort because it is not possible to predict certain of the adjustment items with a reasonable degree of certainty. This information is dependent upon future events and may be outside of the Company’s control and could have a significant impact on its GAAP financial results for fiscal 2022. The expected effective tax rate does not reflect potential rate adjustments for the resolution of tax audits or potential changes in tax laws, which cannot be predicted with reasonable certainty.
