Albertsons CEO: Food inflation 'manageable,' supply chain woes 'nothing' like early stages of COVID-19
Albertsons (ACI) customers can expect higher prices and "spotty" availability of foods, CEO Vivek Sankaran told Yahoo Finance on Monday, but insisted the effects aren't dire for either shoppers or the food chain.
The grocer posted a second-quarter 2021 earnings report that smashed Wall Street expectations, thanks to a 5% increase in digital sales, and hiked its guidance for fiscal year 2021 outlook.
Even with the economy being buffeted by soaring prices, supply bottlenecks everywhere and a shortage of workers, Albertsons — which has 2,278 stores and serves more than 33 million customers across the nation — saw a same-store sales increase of 1.5% this quarter.
Meanwhile, web sales growth — an effect that's benefited competitors like Walmart (WMT) and Amazon's (AMZN) Whole Foods — spiked 248% over the past two years, bolstered by pandemic-era trends that aren't likely to retreat anytime soon. Shares of the company are up 62% year-to-date, and 100% compared to a year ago.
As industries across the globe face major supply chain shortages, Sankaran made clear the current shortages are "nothing like we saw during the early days of the pandemic." With some stores now grappling with empty shelves, Sankaran said consumers can expect the impact on food to be "spotty," but not a chronic problem.
"We shouldn't be worried [when] we cannot get food and cannot get the items we want...availability is spotty," the CEO told Yahoo Finance.
He added that the company is providing its customers with proper alternatives when they come into a specific store.
"You may not find exactly what you want, but you'll find something else," he said. "Next week, you might get exactly what you want, because a lot of products are on allocation."
In order to help avoid any potential craze ahead of the holiday months, Sankaran said Albertsons is already gearing up for the Thanksgiving holiday so that customers feel "ready" and "comfortable that the product is arriving" before the holiday.
"That's especially true as we go into Thanksgiving, the other thing we're doing is making sure that we can get product out as soon as we get them, so turkeys are on the shelves already," the executive added.
Sankaran says items facing the most shortages include products like sports drinks, soft drinks, certain laundry and cleaning products, and — "every so often" — key proteins.
Shortages are adding to growing worries about inflation, which are hitting the consumer just before the holidays
Sankaran said that rising prices aren't completely turning off consumers just yet. Rather, food inflation is "still manageable for the consumer and manageable for companies like us, from a gross margin standpoint and overall profitability standpoint" — with expectations for it to remain that way in the coming months.
He added that there has not been "any fundamental change in the behavior of consumers as to what they're buying" but the company is able to manage any impact by providing consumers with various choices.
For Albertsons, an emphasis on transformation is key, especially in its digital operation. Sankaran expects "continued growth" of customers shopping online.
"Our omni-channel strategy is built around our stores ... people who are comfortable with the quality and the assortment that they've seen in the store now know that the same assortment," he explained. "That creates this virtuous cycle where people are engaging now they can go to the store when they want to do a fresh shop or want that experience."
And it's paying off. The bill for these omni-channel customers is actually three times higher than the traditional customer, he noted.
"When people do both, they just spend more with us ... we're getting market share from somebody else because they're not eating more," the CEO added. "I think there's plenty of headroom as we get better at it and as consumers get more used to operating both digitally and in-store."
Brooke DiPalma is a producer and reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at firstname.lastname@example.org.
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