Q3 2018 was a quieter quarter for Albertsons Safeway following the decision to call off the merger with Rite Aid in August. Yet, the retailer reported decent results nonetheless. Quarterly sales increased 1.8% to $13.8 billion driven by a 1.9% increase in identical sales and higher fuel sales. This quarter’s identical sales growth was the highest the retailer has had since January 2016. eCommerce sales continue to soar, growing 73% while own brand sales penetration increased to an all-time high of 25.2%. Quarter highlights include:
Expanding shopper touchpoints via eCommerce-Following the launch of the O Organics Marketplace on Instacart, Albertsons launched its own third-party marketplace for 100,000 specialty products and health and wellness items. The variety offered is a different assortment from Albertsons Safeway stores, differentiating the platform and helping the retailer gain insight into emerging food trends. The fees Albertsons charges to 3P sellers will also serve as an incremental revenue stream to help drive the economics of the platform.
Growing premium private label brand equity-The name of the game is creating distinctive hooks, and private label is the primary way retailers are trying to do this. Albertsons Safeway especially has invested to grow its Signature Reserve premium brand, adding new products to the portfolio and investing in store marketing dollars to promote them. These premium brands seldom have distinct national brand equivalents, helping to encourage shoppers to trade up for these types of products.
Rationalizing store base-Albertsons Safeway is quietly closing unproductive stores, closing 46 locations over the past year. These closures partially reduced sales for the quarter, but will lead to a more productive store base longer term. To be able to best invest for the future, Albertsons Safeway needs to optimize how its capital is invested. Unproductive stores are a huge drain to resources that could be invested somewhere else, making these store closures a positive sign for Albertsons’ future success.
2018 is proving to be a year of recovery for Albertsons Safeway as the retailer works to invest more long term for the business. Still, despite these improvements, Albertsons Safeway remains below the average industry performance, highlighting that there is still work to be done for the retailer to create a relevant and effective business.