July 27, 2020 / 11:43 AM / 15 days ago

Albertsons signals slowing demand after lockdown boost

(Reuters) - Albertsons Cos Inc ACI.N reported a 26.5% rise in quarterly same-store sales on Monday, but the grocer signaled weakening demand in the current quarter as consumers temper their spending on daily essentials as lockdown restrictions ease.

FILE PHOTO: Customers leave an Albertsons grocery store with their purchases in Burbank, California, U.S., July 17, 2012. REUTERS/Fred Prouser/File Photo

The company’s shares fell about 6% to $15.19.

Albertsons, one of the largest food and drug retailers in the U.S., has benefited from a shift toward shopping for groceries online during the virus outbreak, as consumers stay indoors and cook more meals at home.

The company, which had an underwhelming initial public offering in June, said July sales growth would be in the mid-teens, much lower than what it recorded during the first quarter.

Its stores, including Albertsons, Safeway, Vons and others, together saw e-commerce sales more than triple in the reported quarter.

Chief Executive Officer Vivek Sankaran said consumers were visiting stores less often, but their basket size was bigger.

Surging online orders could mean lower margins for grocers, due to the cost of manpower to assemble and deliver orders, sanitizing and other costs during the pandemic.

“It’s never cheaper to do what the consumer does. Our margins are impacted,” Sankaran added.

For Albertsons, quarterly gross profit margins came in at 29.80%, an improvement from last year, but still below expectations of 30.11%, according to IBES data from Refinitiv.

“Expectations were high going into earnings,” Evercore ISI analyst Michael Montani said. “However, from a fundamental perspective we believe (same-store) sales ... were solid.”

Net sales and other revenue rose about 21% to $22.75 billion for the quarter ended June 20, slightly below analysts’ estimates of $22.78 billion.

On an adjusted basis, the company earned $1.35 per share, 5 cents above expectations.

Reporting by Nivedita Balu in Bengaluru; Editing by Shounak Dasgupta

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