Albertsons Companies, Inc. Q4 FY2022 earnings call

• Driving in-store excellence: Enhanced customer experience contributed to membership growth and market share gains. Simplified tasks and automated production planning in fresh departments improved in-stock conditions. Modernized store fleet with remodels and self-checkout additions.
• Digital and omnichannel investments: Rebound in store traffic, benefits from digital and omnichannel investments. Drive Up & Go expanded, micro-fulfillment centers increased to 7. Omnichannel households spent 3x more than in-store-only shoppers. Digital sales grew. Launched unified mobile app and Albertsons Media Collective.
• Productivity initiatives: Second year of $1.5 billion savings program, enhanced pricing and promotion capabilities, rationalized indirect spend, expanded national buying. Expect to achieve $1.5 billion in savings by end of fiscal '22 and have $750M in future savings from '23-'25.
• Talent and culture: Acquired and developed talent, recognized frontline teams with discretionary payments, amplified diversity, equity and inclusion strategy. Pharmacy teams administered over 12 million COVID vaccinations. ESG investments and goals advanced.

In Q4 '21, ID sales increased 7.5% and 19.3% on a 2-year stack. The company gained unit and dollar market share in Food and MULO. Just for U Loyalty Program membership grew 18% year-over-year to nearly 30 million members. Digital sales in Q4 '21 increased 5% year-over-year and 287% on a 2-year stacked basis. Adjusted EBITDA in Q4 '21 was approximately $1.074 billion, and adjusted EPS was $0.75 per share. For full year fiscal '21, ID sales were near flat and up 16.8% on a 2-year stack basis. Adjusted EBITDA was $4.398 billion, and full year adjusted EPS came in at $3.07.

• Fiscal '22 ID sales expected to increase 2% to 3%, with first half above full year range and back half below due to cycling inflation. - Adjusted EBITDA expected in range of $4.15 billion to $4.25 billion. - Adjusted EPS expected in range of $2.70 to $2.85 per share. - Capital expenditures expected in range of $2 billion to $2.1 billion. - $750 million in future productivity savings identified for '23-'25.

• Product availability challenges continuing to be an issue through most of the year, possibly easing in fall. - Inflationary pressures with potential consumer elasticity, especially if lower-end consumers affected by SNAP fund reductions. - Significant headwind from 65% decline in COVID vaccinations and related margins in fiscal '22.

Q: On ID sales guidance and mid-single-digit comp sales, color on why mid-single-digit and center store changes?

A: Sharon mentioned Easter shift impact and Vivek talked about consolidated buying in center store and meal solution efforts.

Q: On inflation peak expectation and consumer behavior?

A: Vivek expects inflation to moderate in second half, consumer still strong but elasticity possible if inflation remains high.

Q: On gross margin guidance and first half vs back half?

A: Sharon explained COVID vaccination impact on gross margin and modeling of quarters.

Q: On dollar opportunity for best customers and new productivity?

A: Vivek said best customers spend thousands, and productivity is a perpetual engine expected to grow.

Q: On competition, product availability, and inflation impact?

A: Vivek noted product availability challenge continuing, competition stable, and inflation modeling.

Q: On private label, SG&A, and wage pressure?

A: Vivek said private label penetration back to 25.6%, Sharon talked about SG&A investments and wage pressure with productivity offset.

Q: On Easter shift impact and vaccine dollar benefit?

A: Sharon said hard to quantify Easter shift, and vaccine impact accounted for in EBITDA guidance.

Q: On business behavior with fuel prices and Media Collective?

A: Vivek talked about fuel price impact on customer trips and Media Collective launch and potential.

Q: On flow-through rate and gasoline tailwind?

A: Sharon said flow-through rate for comp beyond midpoint is around 15% for EBITDA, and gasoline margins expected to be lower this year.