As it looks to go public, Albertsons is counting its strength in private brands as one of the key reasons investors should bet on the Boise, Idaho-based retailer. The company on Friday filed with the Securities and Exchange Commission its plan for an initial public offering, sans the number of shares of stock it will offer and the price range of the stock.
Besides the absence of stock price and share quantity, the filing is not short on detail. It contained a prospectus related to the IPO that makes the case for Albertsons as a good buy for investors, and estimates the company's capitalization at $11.2 billion. The prospectus begins with a letter from president and CEO Vivek Sankaran — who took the reins last April — who notes that the company, which operates 2,260 stores under 20 banners in 34 states and the District of Columbia, possesses a combination of brand equity and a revamped network.
“The banners that make up Albertsons have earned customer loyalty over decades. Yet, in many ways, our company is only a few years old,” Sankaran wrote. “Since the Safeway merger in 2015, we have successfully completed the integration of our stores, supply chain and technology platforms. We have invested in capabilities allowing us to serve the customer wherever, whenever and however they choose to shop.”
Sankaran also highlighted the company's strength in private brands. "We continue to innovate with our Own Brands — purchased by nine out of 10 Albertsons shoppers — to drive customer engagement and loyalty as well as enhance profitability," Sankaran said. "We plan to launch approximately 800 new Own Brands items annually over the next few years and are proud to have built one of the largest USDA-certified organic brands, O Organics, which is one of our four Own Brands that exceed $1 billion of sales annually."
In its most recent quarterly earnings report, the company touted its Own Brands penetration, which reached 25.6% in the third quarter of its fiscal 2019. In the full fiscal 2018, Own Brands saw $12.5 billion in sales, which the filing notes is seven times larger than its next-largest national CPG company selling through its stores. The company noted the range of price points and commitment to sustainability that characterizes its store brands.
Besides its private label strength, Albertsons' filing also underscored other efforts it has taken to strengthen the company, including recent success in growing net income and identical sales. The filing also highlighted Albertsons’ omnichannel strategy, which includes curbside pickup, home delivery and rush delivery, which have included partnerships with third-party vendors, investments in traditional distribution centers, and recent adoption of in-store micro-fulfillment centers. Since fiscal 2015, the company said it has invested $6.8 billion in capital expenditures, with a plan to spend another $1.5 billion in fiscal 2019.
The company’s most recent quarterly earnings report showed net sales for the quarter of $14.1 billion, an increase of 1.9% over the previous period. Its net income for the quarter was $54.8 million. The quarter also saw growth in its curbside pickup offering of 34%, and growth in both loyalty program enrollment and digital coupon utilization.
If the IPO takes place, it will mark an achievement for the retailer, which has readied to go public at least twice in the past five years.
In 2015, the company considered going public following its merger with Safeway, projecting then to raise more than $1.8 billion dollars, but the IPO never took place. The company also proposed going public in 2018 when it proposed an acquisition of Rite Aid that ultimately was terminated after Rite Aid’s shareholders soured on the price being offered by Albertsons.
Albertsons' filing also comes at an uncertain time for the stock market as fears of coronavirus grow. Monday morning kicked off with a sell-off that caused trading to stop for 15 minutes with the S&P 500 dropping 7.4% and the Dow Jones Industrial Average dropping 2,046 points. However, one key retail stock was doing well as press time — Walmart, which could bode well for retailers, which are seeing sales boosts from shoppers looking to stock up on essentials.