Albertsons Companies(US:ACI)2020-10-20 20:39Financial Data and Key Metrics Changes - Total sales for Q2 2020 were $15.8 billion, up from $14.2 billion in Q2 2019, driven by a 13.8% increase in identical sales [25][28] - Adjusted EBITDA increased by 67% to $948 million compared to $567.6 million in Q2 2019 [28] - Adjusted EPS grew to $0.60 per share from $0.17 per share in the prior year [28] - Gross profit margin increased to 29% from 27.8% year-over-year, with improvements in shrink expense and sales leverage contributing to this growth [25][26] Business Line Data and Key Metrics Changes - Digital sales surged by 243% year-over-year, indicating a significant shift towards eCommerce [8][15] - The Own Brands portfolio, which includes over 12,000 unique items, continues to drive a gross margin advantage of 1,000 basis points compared to national brands [12][14] - Seafood sales increased by 46% year-over-year, while flour sales rose over 20% in Q2 [11] Market Data and Key Metrics Changes - The company gained significant market share across both food and multi-outlet (MULO) categories, with all income segments increasing their spending [8][9] - The Drive Up and Go (DUG) segment grew over 1,000% year-over-year, highlighting the rapid expansion of digital offerings [17] Company Strategy and Development Direction - The company is focused on maintaining in-store excellence, enhancing digital and eCommerce capabilities, and driving productivity through technology investments [10][15][20] - Plans to expand the DUG locations to 1,800 by the end of fiscal year 2021, up from a previous goal of 1,600 [15] - The company aims to leverage its strengths in fresh products and expand its eCommerce capabilities to capture a larger share of the $1.6 trillion food and beverage market [36][38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to outperform the $3.2 billion EBITDA consensus estimate for fiscal year 2021, citing strong demand and market share gains [36][39] - The company anticipates that consumer behaviors will shift towards more at-home eating, providing a larger market opportunity [47][60] - Management highlighted the importance of maintaining a balance between investing in customer experience and driving profitability [58] Other Important Information - The company plans to spend approximately $1.9 billion in total capital expenditures for the year, focusing on high-return projects [29][30] - A quarterly dividend of $0.10 per share was approved, reflecting the company's commitment to returning capital to shareholders [32] Q&A Session Summary Question: Comments on gross margins and promotional environment - Management noted that the promotional environment has become more rational, with productivity measures driving gross margin improvements [43] Question: Thoughts on productivity initiatives for next year - Management expressed confidence that productivity initiatives will lead to improved adjusted EBITDA margins in a normalized environment [46][47] Question: EBITDA guidance and potential limitations - Management indicated strong sales trends in early Q3 and expects continued growth, with a solid EBITDA increase projected for the second half of the year [53][56] Question: Expectations for 2021 and incremental margins - Management believes that the incremental margin for 2021 will be significantly higher than pre-COVID levels due to improved operational efficiencies [58][60] Question: Impact of COVID on customer loyalty and engagement - Management observed that new customers are engaging more quickly with loyalty programs, leading to increased retention and spending [67][68] Question: Strategic M&A considerations - Management confirmed that they are open to strategic acquisitions that are accretive and align with their growth strategy, focusing on tuck-in opportunities [78][79]