Big pension payment leads Albertsons to a loss. Pandemic relief money to the rescue

Pandemic spending fueled sales again at Albertsons Companies in the latest quarter ending Feb. 27.

Same-stores sales jumped 11.8% in the quarter, to $15.8 billion compared with $15.4 billion a year ago, and exceeded the 10.6% growth expected by analysts for the fourth quarter of the company’s 2020-21 fiscal year.

Even so, shares of Albertsons stock declined 4.9% Monday, to $18.24, after the company reported a net loss of $144.2 million. The loss was attributed to a $449.4 million payment to the company’s pension plan. Without the payment, Albertsons would have shown net income of $347 million for the quarter, up from $194 million the year before.

Bob Diamond, the company’s chief financial officer, said he believes that more than 90% of Albertsons’ share of the $4.7 billion in underfunding for multi-employer plans the company contributes to will be covered by the most recent federal coronavirus relief package.

CEO Vivek Sankaran was upbeat about his company’s performance but said growth could slow following the end of the coronavirus pandemic.

“We closed 2020 with almost 11 million more identified households shopping our stores than in 2019, allowing us to understand which categories they are purchasing with us for the first time and how often they’re coming back to repurchase,” Sankaran said during a conference call with analysts.

Customers, many of whom are still working from home, continue to fix meals there rather than go out to restaurants, he said. Sales of meat, seafood, produce, eggs, breakfast cereal and high-end wines continue to sell at higher volumes than other products, he said.

“But we’ve also seen, as we expected, some categories falling below pandemic levels, such as soup, pasta and pasta sauce,” he said. “I think we’re seeing things that have been loaded into the pantry.”

Sankaran said Albertsons could easily withstand inflation of 3% to 4%, but that anything higher would be much tougher.

“We’re going to have difficult conversations up and down the supply chain if it gets to a place where it’s going to exceed that,” he said.

Sankaran also explained why the company decided late last year to ditch its home delivery service in favor of using third-party drivers from services such as DoorDash. At the last earnings call in January, Albertsons said it would no longer use its own employees to deliver groceries, but did not say why.

The reason? The grocery delivery business is not profitable.

“Because it’s harder to recover the delivery costs, we have shifted a lot more of that where we are using third parties, and we are on a path to improve that side of the business,” Sankaran said.

Last week, DoorDash announced plans to open a small warehouse in Garden City later this year that its drivers will use to deliver grocery and convenience items and prepackaged restaurant desserts to customers in the Boise area. The warehouse on West Chinden Boulevard is set to be ready between July and September.

What is making the company money is its Drive Up & Go program, where customers order groceries online and have them brought to their cars parked in dedicated spaces near the store entrance. Store workers take items from shelves throughout the store and bring them out to customers.

“That was our fastest-growing segment of our e-business this past year,” Diamond said.

Digital sales grew by more than 200% in each quarter of its 2020-21 fiscal year, which ended Feb. 27.

“Drive Up & Go grew over 1,000% in Quarter 4 and 865% during the fiscal year,” Sankaran said.

During the year, Albertsons added store pickup service at 343 stores, with a total of 1,420 stores offering Drive Up & Go. The company plans to have the service in 2,000 stores by the end of fiscal year 2021-22, reaching 98% of its stores.