Albertsons Companies, Inc. Class A

Q1 2021 Earnings Conference Call


spk_0: thank you for standing by welcome to the albertsons company's first quarter twenty twenty one earning a conference call oh purchase bench will be emotionally mode until the queue in a session this call is being recorded after the presentation they'll be an opportunity that questions i would know like to have the call over to melissa place on gpp treasure and investor relations please go ahead
spk_1: good morning and thank you for joining us her elder to company first quarter twenty twenty one earnings conference call with me today from the company or vex a grin or president and ceo and bob diamond or cfl today for that will share insights into our first quarter results as well as review our progress against our strategic priorities pablo them provide the financial details of our first quarter as well as updated so year twenty twenty one outlook before handing it back over to the vector or some closing remarks after management's comments we will conduct a two and a session i would like to remind you that management may make statements during this call that are or could include forward looking statements within the meaning of the federal security flaws forward looking statements are not limited to historical facts that contain information about future operating or financial performance forward looking statements are based on our current ex cases and assumptions and about risks and uncertainties that could cause actual results or events to be materially different from those anticipated these risks and uncertainties include those related to the coven nineteen pandemic additional information concerning factors that could cause actual results to differ materially really from those in the forward looking statements are and will be contained from time to time in our fcc filings including on form ten to ten k an ak any forward looking statements we make today are only as of today's date and we undertake no obligation to update or revise any such statements as a result of new and for me ethan future events or otherwise please keep in mind that included in the financial statements and management's prepared remarks are certain and gap measures and the historical financial information includes a reconciliation of net income to adjusted net income and adjusted ebitda and with that i will hand apollo
spk_2: or to the back
spk_3: those little so good morning everyone and thanks for joining us today we're good uncharted territory to one with comparisons to last year's been burning stock a period and the gradual reopening will boost your groupies as vaccination rates accelerated and covert related restrictions were lifted the this dynamic environment we remain focused on executing our strategy so did around people in relationships with our customers and leveraging technology to run a business more efficiently and effectively i am pleased to report that our results with a quarter exceeded our total plans of course on key metrics increasing the confidence to the balance of this year already sales grew sixteen point five percent on a to your bases and we continue to gain market share in food on a wonder beaches are the new law which includes most food drug mouse club dollars and military on a two year basis in addition with you the go off adjusted ebitda of one point three billion and adjusted u p s of eighty nine cents a share a heard of our expectations against a backdrop of group exceeding two hundred percent in every quarter in preschool twenty or digital initiatives continue to resonate with our customers and we have returned the same levels be achieved last year with digital sales which virtually flat europa you're into one and two years stacked or the sales growth of two hundred and seventy six percent with all options we haven't place you've achieved ninety five percent customer coverage would be commerce and retention has been strong at the same time we have seen a pickup in installed transactions versus que one twenty and many of those incremental install shopping trips are focused on fresh but the end of you want twenty one we had three point six times the number of on channel households than we had two years ago in nineteen we've seen as that as customers move into only channel the also increase to spend in our stores with a net group of seventeen percent per household spend in the quarter and a total span rate of two times that of an exclusively install shopper in fact into one with identified households an average install shoppers sales were down was on the channel customer sales were up your over you the gonna identified households by eight percent year over year for the last fifty two weeks allowing us to better understand the needs so we can personalise or offerings for them and drug recurring and incremental spent membership and are just for you learn to program continue to accelerate and what's not over eighteen percent year over year and you one twenty one to twenty six point seven million members the altar increase the number of actively engage customers but almost thirty percent a real the ninety four percent retention rate would engage says for you how households remember that actively engage customers spend four times more with us in summary of strategy of building lasting relationships with customers through a combination of digital and in store engagement is driving or top line overall a strategies focused on for priorities install excellence accelerating additional an homage and capabilities
spk_4: driving productivity
spk_3: and strengthening our talent and culture install excellent as demonstrated to the one stop shopping experience with continue to provide for our customers supported by the quality variety and depth of oppression on burnt offerings that give us a competitive advantage in fresh which has always been a strategic focus for us we continue to see sticky this giving us confidence that a strategy working the first department says good outpaced cent store but proximity to hundred basis points on a to your bases which each of our first categories ahead of people than iq levels as customers continue to consume more musical that's not markets have opened up we've seen customers shopping in our stores more often and could you to see fresh as a key driver for growth own burns portfolio also continues to appeal to our customers with strong sales driven by the introduction of new innovative products as well as our focus on albertsons legacy divisions that were historically under penetrating fuck you want sales penetration was twenty five point two percent up over a hundred basis points from que one twenty when supply shoes impacted six we could do to be launching three hundred and eighty new items and que one twenty one many of which were signature fobs boca adams including trail mix mixes various knots and dried fruits open your almond butter and signature select premium beef patties we could do they expect to launch over eight hundred items this year but also proud of own bread scheme that was named the store brand magazine twenty twenty one game changer as a private brand that revitalize the industry we also could do to couple on demand for convenient and fresh meals as consumers come to us for food beyond the purchase of ingredients we've begun the rule out of already meals are ready to eat ready you to heat and bridges cooked meals program and expect to be in approximately five hundred stores by our fiscal year end finally we continue to invest in our stores reopen five new stores and completed thirty three upgraded bought a project during you one twenty one a second fiery declaration about the tsunami channel capabilities digital is an important good driver for us as we strive to provide an area of the mean shopping experiences for our customers we added a net three hundred and twenty new dog locations drive up and go locations and you want twenty one bringing a total to seventeen hundred and forty and dog soon grew seventy five percent year over year we not expect to have dogs in approximately ninety nine hundred and fifty locations representing approximately ninety eight percent coverage by the end of the second quarter as part of a good flags and digital we also remain focused on delivering the spirit customer experience as well as improving profitability for example we could do to achieve on time filling indelibly way to excess of ninety five percent demonstrated consistent want our delivery of dog pickups he began to whole lot of are integrated lot in common that offerings of connected customer experience to a single interface we launched a new san jose berrios or ever see and that plans for an additional six and of these before the end of off his career bringing the total tonight and of seats we sped up delivery times while reducing delivery costs broader by expanding a third party delivery still network will also adding door dash one hour delivery to our economists options which has been ruled out denied division so far he also implemented the enhanced picking software at old dog locations to help optimizing standardized picking processes increasing picks for our and enhancing audit prioritization and we improve customer service by migrating all support to one id platform a third strategic priority is driving productivity to support reinvestment of the business and help offset inflation we're making progress against or productivity agenda i'd be exceeded our internal expectations into one during the quarter he made significant progress and labor efficiency shrink promotions optimization and indirect expense we could you do they expect to achieve one point five billion dollars and go savings by the end of fiscal twenty two a foot by already the strengthen our talent and culture and supporting the communities we serve we could you did add common throughout the company that bought the carpet and division level including the recent appointment of jennifer jennifer signs are new to merchandising officer and are very proud of our store level team so adapting well to a changing environment a fantasy game also continues to come through for our communities to date they have administered six million for the vaccine doses
spk_5: in addition you and you one
spk_3: our nursing neighbors fundraising drive raised approximately nine million dollars i'm a generous customers that are checks stance which was matched by the albertsons companies foundation resulting in eighty million dollars and funds to feed children and families the song as part of our ongoing focus on the sg we recently announced that are the first company in america to introduce a hundred percent zero emission refrigerated grocery delivery truck and we have been announcing our supplier diversity program through new partnerships and an improved database and tracking to and in conjunction with i recently completed new materiality assessment they focused on quantifying a carbon reduction opportunities it's landing our food waste plastic and packaging footprints and further developing goals and targets would be a nice and community stewardship we expect to share a key focus is and commitments later this year and now i would like to us both to cover the details of a squad of financial results and outlook
spk_6: thanks for that and hello everyone i am pleased to provide details on a strong first quarter results as well as an update to our fiscal twenty twenty one outlook in many cases i will make comparisons back to our first quarter of fiscal twenty nine teen period to demonstrate the period that of comments vs our pre pandemic levels for the first quarter total sales were twenty one point three billion dollars up approximately fourteen percent or two point five billion dollars compared to the first quarter of fiscal twenty nine teen which is primarily driven by our sixteen point five percent to your stacked identical sale
spk_7: results
spk_6: a gross profit margin came in at twenty nine point one percent during the first quarter or twenty twenty one compared to twenty nine point eight percent in two one twenty twenty and twenty eight percent and que one twenty nineteen exploiting the impact of fuel a gross profit margin was up ten basis points compared to cute wanted at twenty twenty increased and increased over ninety basis points compared to que one twenty nine team the increase compared to que one twenty nine team is primarily driven by improvements in shrink expense our productivity initiatives sales leverage and improve pharmacy margins related to administrator forbid nineteen vaccinations partially offset by investments related to our growth in digital sales er sj as a percentage of sales experience you have increased one hundred and fifteen basis points year over year as we saw sales the leverage versus the period
spk_8: of significant heightened demand and the first quarter of last year
spk_6: that important importantly on a two year basis we decreased or it's test dna as a percentage of sales i seventy five basis points tell that nineteen related expenses during the quarter total the proximate late one hundred and thirty million dollars some of this was one time and nature including in the right off of some covered related inventory and supplies to we expect these past and future close quarters will be lower interest expense was one hundred and fifty three million compared to one hundred and eighty one million dollars in the first quarter a year ago the reduction and interest expense is primarily driven by lower average interest rates due to are successful refinancing transactions during fiscal twenty twenty and our continued to leveraging adjusted ebitda was one point three billion dollars in the first quarter of twenty twenty one representing compound annual growth of approximately twenty two percent versus the first quarter of twenty nine team the growth and adjusted ebitda versus the first quarter twenty nine teen represents strong flow through of approximately seventeen percent adjusted net income was five hundred and eighteen million dollars or eighty nine cents per fully diluted share that present and compound annual growth of over seventy percent compared to que one twenty nine nineteen we ended que one or two point two billion in cash on the balance sheet and are pleased that this gives his flexibility to continue to invest and growth opportunities capital expenditures were approximately five hundred and thirteen million dollars during the first quarter as we up and five stores closed five completed thirty three remodels and invested in our digital and technology platforms we continue to expect our spent to be approximately one point nine billion to two billion dollars during fiscal point
spk_9: twenty one
spk_6: during que one we also received upgrades from our debt rating agencies as moody's upgraded us to be a a stable and smp upgraded to gonna be stable we ended the quarter with our net debt to adjusted even dog or a shot at what one point five times on an l t m basis consistent with the levels we exited the fourth quarter at this by twenty twenty turning now to are updated out that the fiscal year twenty twenty one given the outperformance and one and recent trends we have updated our guidance for fiscal twenty one some of the outperformance and que one is related to covered vaccine revenue that was ahead of expectations and this revenue source has begun to taper off as the pace of vaccination slows nonetheless are competitive advantages and the underlying stickiness of the business games during the pan damage as well as the ability to pass along modest inflation and the continued consumer demand for premium items gives his confidence in the strength of the business for the ballots the year we now expect identical sales on a two year stack basis to be in the range of approximately eleven to twelve percent compared to prior guided said nine and a half to eleven percent we expect a just a dps in the range of two dollars and twenty cents to two dollars and thirty cents per share which represents two year combat pounded annual growth of forty seven percent at the midpoint of range up twenty five cents
spk_8: from our prior guidance range
spk_6: we expect adjusted either dot in the range of three point seven billion to three point eight billion dollars up two hundred million from a previous guidance range and representing two year compound annual growth at approximately sixteen percent at the middle
spk_8: right have a range
spk_6: into to to date we are seeing our core business sales on an average weekly dollar basis and market share games continuing at similar levels to do one as a result of seasonality and the drop off in the pace of covert nineteen vaccinations administered we believe the current consensus expectation for to to either done margin is still appropriate we continue to believe that our productivity initiatives and seasonality will dry stronger either down margins in the back half of the year compared to que to as we noted on the your and call and now the that will provide some closing remarks
spk_10: thank you bob
spk_3: before we turn to q and a i want to share a few closing remarks when it's hard to predict the impacts of covert nineteen on demand over the long term we believe there are few friends that stick with us we believe digital engagement with consumers in our sector will continue to increase this provides us with an opportunity to gather more data and deliver a better more personalized shopping experience what our customers second even though we saw step change and twenty twenty we believe consumers will increase the use of commerce solutions especially pick up and store and rapid delivery particularly now industry consumers badges speed indelibly and we're committed to continuing to enhance speed by leveraging not great
spk_11: or locations
spk_3: lastly we believe more remote remote work is here to stay this means more meals at home which will continue to benefit our business particularly the demand for fresh ingredients and meals albertsons companies as well positioned to capitalize on these trends given all unique need combat competitive advantages and as we go forward will remain focused on investing in technology to amplify our strengths and because of faster and more efficient business to better serve our customers and drive he bit duflo to in up here now with this as a backdrop many also shared some insights on recent times in up performance despite business reopening and people resuming travel or sales momentum continues with go to market share and be a very focused on continuing these trends are market share when looking at our average weekly sales dollars tales and cute to are continuing at the same levels as into one we are seeing continued strength in saves of items that were elevated throughout the pandemic such as meet seafood produce and high winds providing evidence that some important food and beverage categories remains shifted to put it on what we're seeing higher cost inflation in some categories we saw modest inflation during q one and we were generally successful in passing a to as the competitive environment as you made rational and we could do to see households upgrading to more quality products indicating that the consumer is still strong overall the country the deniability to continue to produce strong results i want to extend my thanks to our entire team of approximately two hundred and ninety thousand and associates but could lead to take care of our customers and communities this quarter as well as to out the pandemic will not take your questions
spk_0: thank you oh now become the question and answer session in the interest as i hearing from that many colleagues as possible we ask that you limit yourself to one question to join the question in a press died in one on your telephone keypad you'll hear a tone and knowledge in the request if you're using a speaker phone please pick up your handset before pressing on t to withdraw your question please press died and chin once again and one in the question how can they should ask a question please press died in one the first question as from john i'm baffled some go to high partner please go ahead
spk_3: either that or on going to be too quick ones here was now that you've got another twenty weeks under your belt is here
spk_4: what's your are your thoughts regarding the of secular algo right now that may have changed because the coded
spk_3: and then secondly with you know it all the capital right the extra cash and in freakishly you got what would you like to invest in strategically and i'm not talking about you know dividends or stuff like that but more of eat organic or or emanating that do you think would be added to the business is there anything like that other
spk_0: primary thing to the having technical issues with a speakers why am i believe that they are speaking now that we're not hearing them i'm going to pause for a moment and i try to reconnect their line
spk_12: one moment please
spk_0: okay we have the speaker again and please proceed
spk_3: hey john and everybody sorry about his glitches said that cigarette sorry about that guys up jellybean to your question first on our secular can bake sales or i'll i'll point to a few things one a very healthy consumer okay we're still seeing no trade down are they're still buying many many discretionary items and i stole radio trade up on the planes excedrin second it's clear to us but they're eating a lot more at home not a fresh sales are higher than the rest of the store as it so that that continues as i think i've been partly driven by the fact that people are still working from home and i've always maintained a point of view that that will continue into the future and also partly that people are more comfortable cooking at home dot e commerce continues to be strong you know what if i was to dissect that a little bit you'd see that are ecommerce transactions are still higher over last year but the baskets as small as you would expect because people bought everything and anything they could last year on e ecommerce but what's very interesting is that people are coming back to the stored the transferred to the top into the store is gone up significantly and event of week of a week of a week to the last quarter like so far in those a few things i'll say and just a lot more digital engagement or which we love john because now we can get more data and we can personalize and do the right things for them on cash or our priorities will still be the same it's about growth and and we will push for the said organic growth will continue to invest in our fleet i think it's clear to us that stores still matter and will continue to do that and it's better to put a lot of energy into digital growth of and that is bought the a software side of the hardware side within are a lot more energy this year and we see a lot of promise then will continue to do that and would be opportunistic on emanates and the stronger we are the better the returns will be on emanate as it's turning out for us and things about duties
spk_0: thank you
spk_13: the next question as some combination of citibank please go ahead
spk_14: hey thanks guys
spk_13: do that together year prepared remarks i didn't get a couple comments about inflation just just wonder if you could dig and a little bit deeper in terms of what you're seeing are not on the cost of good side of that inflation equation and how you see that turning over the balance of the year and then related to that added
spk_14: is it change the way you think about fighting on national brand vs
spk_3: what you might do with your private label product price pricing thanks if you want to touch on inflation bob and i'll do the price in peace you bet
spk_6: for what we saw in a product cost inflation was
spk_3: it up somewhat modest one point five one point seven percent during the quarter and the sale lab which we we saw that i was increasing slightly as the quarter continued that still within a reasonable range yeah and that ended our our outlook on that is that i think it might be slightly higher or or towards the back of the your fault but i've always maintained that if it it gets used to be in the two to four percent range it's actually good for the business you know especially with a strong consumer like i've indicated that this is something we can pass through and be get a lot of leverage when it gets outta that range now when it comes to fighting on own brad and look out the we we are we with our beds penetration is up that's a good sign it helps us on gross margins in a we were all worried you were all right the own brands are going to decline dog but it's coming back nicely or on burn spicing will always be the last two things one is pricing to make it an opening price point and time
spk_15: seen on cat on some of our products which are destination products were will be a little more aggressive because we can compete well with the national brands and we just crockett with what's happening in the national brands
spk_0: the i give conduct
spk_16: thanks bob
spk_17: or next question it's from karen's shots with barclays god i think so much i just wanna clarify a couple things that you'd said am a i think what you said is that you were comfortable with the ebitda margin for to jail or consensus marginalise appropriate for to do so i would different looking at that that
spk_6: from what i can tell is a five percent ebitda margin so is that the right way to think about the delta between one two and two to there's obviously some deal average but the delta on that that change sequentially is what the contribution of the vaccines were to one two
spk_3: mostly to one too gross margins and of turn understand the magnitude of the vaccine components
spk_18: on one you good yeah good question or turn you got port of that right there certainly the vaccine income was a portion but actually slight the the larger portion of you go back five years and approved twenty twenty out you'll find there's a season our the
spk_6: adjustment of you well or difference from queue to include to going down
spk_3: sixty to seventy basis points
spk_17: happens every year and than that pops back up as you get into two three and two for so the bigger pieces of that just normal seasonality a bit on a pharmacy and other and hundred accelerating dog or like with pulling it further up into que to because we think we can go fast food and should go faster and so it's a combination of things that guarantee that's right okay thanks and then thanks for the clarification and that am i wanted actually disco sitting here years to the centralization of the supply chain of i guess i wanted asked to broadly how you weigh the risks and mysql are wards of that effort because i guess in in kind of the history of centralization it's always huh
spk_3: i'd have been a short term benefit by longer term it hasn't always worked so and when i if he could give a little color are not and then is the vast majority that five hundred million and i mean assuming it is all a gross margin benefits the extent that that centralization is executed the way you hope
spk_19: yeah there are two that are two topics are two different initiatives that help with gross margins and and if you think about the second half of the you're carrying bewilders maintain that board of of productivity is coming in the second half it's because of these two new initiatives the first one is around supply chain which is optimization
spk_3: like distribution centers rethinking how the network of distribution centers and so on the second one is by pulling our spend on major categories and buying it as one that national company rather than buying these big cpg good products as a different divisions not your hundred percent right and you know central like nation the the notion of pure centralization has been short lived and you're always get into the other side where people stop listening to what happens to the field we've spent one we've done two things one the pursued the dollars and will continue to pursue the dollars and think of that is one set of initiatives we've spent equal or more time on thinking about how we do it how we make sure we're able to leverage to local knowledge that people have with meeting the of the for those teams in our market so that they can provide local knowledge and inside and it added themes at the center so that they can start getting the leverage where we need to write and so i'd be worth through every detail there and be very conscious of
spk_20: but there are people on my team who have been to the other side and and so we know what we don't want to do and so we've been cautious but your caution is a good one cared now but
spk_0: are you know to me i'd rather do this and work it then not be afraid to do it that's where we're going down this path okay that's helpful thanks very much
spk_21: the next question is from got my skin with or five capital please go ahead
spk_0: scott mr musk a new line is open
spk_22: okay that is national
spk_23: lomas online color the next caller is edward kelly with wells fargo please go ahead fluid
spk_3: i got i got the morning
spk_6: i wanted to go back to either gross margin your performance on a two year basis you know up of ninety days point is obviously strong can you provide bit more color in terms of like unpacking that bomb and and the drivers of that and then as we think about que to should we expect a similar trend i'm in a comparison similar you start off the same way from an id perspective it seems like and then just bigger picture if we were to take a step back
spk_8: how do we think about the sustainability of this gross margin sort of post pandemic vs pre pandemic and the gamma to this you think ultimately the you think ultimately fades
spk_24: okay i'll take first half of that here as it's far as the the navy bases point improvement relative denied team
spk_18: it's really made up of several things here we have
spk_3: had a tremendous shrink improvement in addition to that we've also had several productivity initiatives that be in one of them that it addition to that we've had some promotions efficiency improvements that that it's helped us out as well as we talked a little bit already on the call about own brands our own brands mix has rebounded back up and
spk_6: as you know that has
spk_18: a hard gross margin to it
spk_6: our first mixed that also has been growing
spk_4: the as well and so all of those things kind of work together
spk_6: the to support that that ninety basis points now
spk_3: as far as going for a week guided in our last conference call as you might remember his he said that we we felt like that we would be directional a flat to the twenty twenty
spk_8: fiscal year overall gross margin which implies that will be up the roughly sixty five basis points to you
spk_3: up in twenty twenty versus twenty nine team for the full year it's not going to necessarily be you know a flat amount the quarter because last year was kind of a strange here and there were there there were some some quarters are hired another so i would kind of the it if you're to pattern it off of anything i'd better than ah said adding that to me nineteen
spk_22: and add you know to me lot of what the above mentioned what operational thing so swing pick cetera or what i said earlier about supply chain and cost of goods also continues to support gross margin
spk_23: we are always always seeking tailwind so gross margin okay
spk_6: that means program when done right in the stores a creative to gross margin and so we keep seeking that know what i will tell you that you know our intent will never been to keep expanding as ghosts margin as the means to the bottom line right because what's this gives us as it gives us a chance to surgically keep investing in price and other things the we can do to drive go for and get more volume through the be an hour which is always which clearly not business of gives us tremendous flow through so that's how we played you'll always find are seeking more ideas and just one quick follow up for you on the two billion plus pass balance that you've got any talk about investment but if you you've also then you know casual as and company rag you haven't some you've been more than covering you know that that need how do we think about in on a real service
spk_3: like optionality around his cash balance first the and by the it's debt reduction whether it's he of sponsored it's still on a lot of stock of there was something to do opportunistically there with that interest you you have bought stock and passage kind of curious as to how we really think about this two billion dollars or happened with it yeah
spk_25: ed a good question but we really do have are focus on investing it back in the business to drive sales
spk_0: that that's really at we may do
spk_26: we had planned to to pay down just a little bit of that this year so we'll use a little bit of that as a lover bonds comes to a little bit later on
spk_27: you know we keep our eyes open for him and a opportunities but that would be our priority yeah and we will remain opportunistic and we are a good where we are good at buying and merging companies and as those opportunities come we'll do it but primarily now we're focused on driving the organic growth
spk_26: we think that's a lot more potential in the in the transformation we're doing right now great idea
spk_3: and the next question is and thought my skinless or aside capital please go ahead try to do this again or for you guys can hear me this time actually i can hear you got hot okay perfect my phone anyway i wanted to ask a longer term question around on to channel digital i just really understanding two things number one it seems like you guys are trying to pursue a much more acid light model compared to some your competitors and i want to make sure my interpretation is correct their than the other thing i want to talk about or he may be class answers like keeping the store environment shot bubble and i was in a walmart yesterday houston i think there was just fighting fighting the shelf with the pickers is is difficult says those right to question
spk_26: follow up
spk_28: yeah me let me start with the the second question first right because i commerce business i would say i don't try to sit as acid light i think it begins with saying as great a sassy to the store from stop right and so you know we're like god ducks paddling pretty hard every day
spk_26: what on the top but we paddling very hard to run great stores and it simple for us it's gotta be for it's gotta be clean the fresh has to be really fresh the got off with a variety and we better have good service and by the way better manage the labour properly and there's a group of us who have been i go about doing that when you have that it gives you a great
spk_29: base to build an e commerce business and commerce business is built on those stores are the reason i don't it's acid like scott is that i do believe that there is room for ever cease and nfc group located the nice thing about the amenities is it it is assets it's more assets but it gives you off snappy you can go to sort
spk_30: and face you're not making any single that you're making many many bets and with every passing year you're getting more new technology or on the bet you're making so in a week we like that that's the approach that we're taking up on the delaware side of it yes we are going we were asset heavy and we are going acid light right because i don't believe the model of the
spk_3: milk one with the truck it's a good idea for grocery and so we're using much more of the point to point della so that's how we think about it but everything everything rests on running great stores which is always on number one priority that so that critics and them my my follow up as i see a little bit the attic were maybe i was going on this question is dead
spk_26: stock sitting here with my math just under five times he bit twenty twenty two
spk_0: really low almost cannibals get to the stress levels is it is there anything from a management perspective that you think you guys can do to try to get more attention to what you doing to of get that valuation up
spk_31: to think about it
spk_32: thank you scott you know it's up and night you know you you there's about eleven billion dollars breed pandemic
spk_14: a real estate value of also embedded in the so you know we think your we agree with you we agree with you
spk_31: and hopefully continue to continue to put up quarters like this will make a difference i guess thanks very much as course
spk_3: the next question and spend ten goldman with jp morgan please go ahead hi thank you you mentioned that you are successful in passing along inflation other that you still well below that three to four percent range you said is is still good for the business you're a lot of the packaged food companies the cover that are facing more later than they expected even a couple months ago now some of them are talking about seeking second rounds of pricing with customers i'm curious you know what does your appetite for letting second rounds through and a general said it's it's the start there's been a lot of pushback to that but right now unless the city is just not that powerful a drivers and maybe you're thinking about letting more food than usual i just kind of wanted to get your sense when you know how you dealing with some of your vendors coming back asking for more
spk_32: yeah i can a of the morning yeah then put it this way of plus it's always on a case by case basis of okay and i know i know that some of our cpg companies are facing challenges and labor challenge and as in transportation etc
spk_6: we have a have a large hold their own brands business and because of that we get tremendous transparency also into what wanting to what's happening to cost so we end up having good and constructive negotiations with our with our supplier partners
spk_8: and where is where it is warranted and legitimate we will pass it through
spk_3: and but i'd say the three to four percent recognize that yes we we have several cpg to read there is a legitimate cost increase and requiring a price increase and will do that but it it really is that our entire portfolio goes up three to four percent you know you always something that is going down especially when you have such a high fresh component of and and that's what happens that's why you end up with this three to four percent despite you hearing the noise about inflation and many of the cpg company's coming together the all that said i do expected to be a little higher in the back half of this yeah there's no question about it i do expect to be i have now
spk_33: and but in the range that we feel comfortable passing through
spk_3: okay that's helpful and or could follow
spk_0: as a sign that any of your major competitors are planning on stepping up discounting in the back half of the year
spk_34: a pushing any the major benders to start spending that more the stories i know some of that is counterintuitive with the place in it's gone on that to try to get a sense of the environment machine or now i'm looking for them
spk_0: it's remarkably about the same as it was for the last i looked at it just recently know you index promotions and stuff it's about the do the same for the last several goal last two or three quarters can i think you have to wonder you talked about the last the city the other thing to keep in mind is supply in our those the types of
spk_35: things that you would tend to promote
spk_0: and put all our like of like soto a beer or a gateway not things are a big things are at the entire supply so it's just going to be
spk_36: harder for us to do anything like that and you're seeing the discipline the marketplace
spk_37: thank you
spk_38: the next question is from kate mcshane with goldman sachs seats go ahead okay kate because the area
spk_3: nixonian align itself and kate why don't you dial back and will pick you up what's going the next car emily the next caller is and the and goodman morgan stanley please go ahead everyone the morning you can hear me with nice quarter now we can hear you
spk_6: right so my first question i want to talk about the top line and the quarter so the stacks look like they're accelerating the industry certainly not so you'd certainly taking share can you talk about how you look at the business it looks like it's accelerating vs ah that exhilarating que one can you break apart units and pricing and take out fuel and it just for seasonality and that fair is an accelerating is it about the same versus the prior quarter and vivid you had this hypothesis pretty early on that dumb it a habit during coven would would hold it looks like that's true so far why should that continue even as we you know moderate as we go back post cold and like why should i bother to still i'm going for using thing it gives you confidence in that now
spk_8: yeah a in libya to the second one bob can you didn't come back to the first one us so let's go into what is driving ah
spk_0: that such them into that behavior or i always believe that the the bigger impact of the lasting more lasting impact of the pandemic is the work from home right and so you're finding more and more companies going to a model right because they come three days to the office or to this of the office but that really means today's at home or one
spk_39: day at home and and that's a substantial number so i think you're going to see as long as that continues and we all get into this mode of work working you're good to see more in home consumption especially breakfast and lunch and and that such that substantial up the second thing we're seeing this one i don't know how long it'll hold okay which is people cooking more at home
spk_4: and the and i'm seeing that only because you're seeing a lot more fresh sales then than twenty nineteen and it's got hired on a relative basis to the rest of the store
spk_0: that i don't know sing are other how long it'll last but you know i can i can see that pattern going for at least a year
spk_39: the real test will be what happens when schools open what happens when colleges open the fall what happens when people stop traveling more and so on which is why in our outlook you've seen that are ah sales are adjusted a little down for the second half but i get to the friends i'm seeing now up pretty positive
spk_3: up and then on the first item simeon
spk_8: you know if you really can't look at the id rates very well especially in the first quarter is things are really crazy a year ago you know but when we it if we obviously track things are on average dollar bases on a weekly basis and dad we saw some very
spk_3: solid strength and momentum really throughout the quarter so consistent right that's right right and it is reset and are prepared remarks we continue to see that into the second quarter much the same level as we saw in the first quarter so we're we're very optimistic than or sales are gone and you
spk_0: and let's call it is kate mckinnon from goldman sachs to go ahead
spk_40: hi good morning to hear me yes skate sorry about the technical stuff but we can hear you well
spk_41: okay good no no no problem at all i just wanted to follow up on the digital delivery cheese the third party to sell men's i just wondered ultimately in a what that looks like and terms of how many partners do ultimately have when it when it comes to third parties to sell named arm and what does that mean for pass
spk_42: ability and finally just the last question related to that is just what does it mean when it comes to on data and and on using these are other third party settlement marketplaces
spk_6: yes a kid let me split into two buckets one is recognize that are the fastest growing business for us is hour drive up and go and be really excited about that guy it is going on top of last year and it's growing faster than the expansion rate of our driver or drive up stations or ended the driver
spk_8: all we do we have everything like we are we do the entire dives of with the service
spk_43: that's a second thought of the business where customers are ordering to us and we're using a third party to do the last mile and that's purely more than anything a deficiency play because it allows for speed you can get it done in a two hour delivery and we believe in the motion of speed and ecommerce right so that's the sec
spk_3: but then the third part of the businesses where we have a third party whose pick getting the customer order and picking in the store and delivering it and so that's that and that part of the business you know we're using a we're using multiple partners on and really our philosophy there is that we're going to beat the customer where they want like and and early and meal for customers most of our customer the shopping bought the best customer the shopping both online and and in store and stores are great locations so i think it it's it it works for everybody including the third party window shopping proximal to where the customers living absurd that works for us and what me
spk_40: doing is with we're engaging more and more in is that a transparent here on the data and and loyalty program so that we continue to maintain that relationship and have the knowledge of what that customers buying i'm so we'd look at it and three parts and i just think at the end of the baby to focus on reaching that customer many many different ways and kim
spk_6: the next question on my phone montana us as a crime go ahead
spk_18: good morning thanks for taking the question is what is the ask if i could
spk_6: ten percent id sales decline in and sixteen and a half two year if you could share what the traffic and ticket split was it did sound like traffic is positive as i thought that's an important point tease up and then just the follow yeah
spk_3: first of all the customer accounts or transactions a it is up other the the basket is is down vote so were seen some of that we and is a real positive thing people are coming back to the stores more than where where they were a year ago certainly ah
spk_44: and dad were seen
spk_40: strong
spk_0: sales and and volumes and what yeah michael up you know what's what's interesting is the traffic can't the transaction called is up both online and in store over last quarter right
spk_45: and you would expect it in the store but you know it's nice to see that up online transactions are also over last quarter so and and and it's really a matter of baskets dropping which also you would expect given how much of our stock up there was last year
spk_46: okay that makes sense and then just a follow up had was seen some good attraction i think in multi channel and i just wanted to get a handle on any color you can share with respect to kind of the flow through rates as that business continues to grow and how it would compare to you know kind of the core brick and
spk_8: order flow through is there a pathway to get it equal or above when you think about that for second and bob
spk_14: yeah i'll i'll start here certainly are a biggest growth has been a dog and or drive up and get and dass or drive up and go on and make them all bases his
spk_4: it is is improving as we is me made a long as we're getting more and more volume and to that and we can see a day when were that probably will be indifferent
spk_3: as far as a delivery i don't know that we can see that that's ever going to be something that can be as profitable as is drive up and go or or the other that that last mile that piece of it is always gonna be in a remote last night and michael then what you do so you
spk_6: like to have later the user or to as and it's yeah we're relaunching on media platform and so you've you you find other sources so far revenue and profit are because you're getting more and more digital engagement with that customer at that's what we're excited about six you think about the commerce yes is a little more
spk_33: logistically intensive like you get more digital engagement that opens up other avenues for you and and that's how we see this to and then me you know i think there is a scenario down the road read and that see start getting the cost curve project pretty far down so you know compared to maybe two years ago we're feeling
spk_0: seeing a lot more livers to make the ecommerce site of the business
spk_47: indifferent the second call it that really interesting stuff thank you for the color the next question it's from robbie oh man with the bank of america security please go ahead
spk_48: iraq in my my first hot can my first question can you hear me
spk_3: yeah fuck you can assert richer have they excellent excellent hey and i apologize i i dialed in in i i did miss some of the call that so i wanted to just follow up i think means question
spk_18: it does look like you gain market share this quarter
spk_3: is that right from your perspective i'm in it if so you know to do you think you know what was the biggest gripe you think vaccines played a role in that do you think you were doing things better with in stocks on be doing things maybe with relative pricing in in where do you think the market you're coming from
spk_49: up at the if you if you look at a pretty for decompose it and how would were beginning marketshare beginning a lot of market share on food in food in the world of food are you know or less so if you compared to new law but or to your bases were also holding market share a meal of that includes all of the other channels
spk_4: i think we're keeping the market share because one out we have we've seen a greater index enough purchases on fresh a relative to the rest of the storm citing be a dodgy transactions are up the transactions up because people are coming back more often for fresh and and that helps us with the marketshare so clearly
spk_3: as adapter component of component of it you know until your interesting of the vaccines we did the proud of what we did on that okay we'll get punched of about wait on that vaccines once again just doesn't get older that proud of how flexible the team was are created the team was we got a lot of customers in who are not shop
spk_50: with us and recap some of them so in the sky scheme of things while be it wasn't a vaccination traffic that drove our photos of food sales marketshare i think it's more fundamental operations and running great stores and having dizzy commerce business beginning to harm
spk_51: that that's great grandson the recorder
spk_3: thank you i'll be
spk_49: and next question is from christian cacti it with deutsche bank please go ahead
spk_3: hi guys that good morning and congrats and a great quarter on i guess again follow up on on the market share that you continue to gain like really good results there to your sack so i was just curious you know how that has bought out the first quarter compared to your expectations really as you started laughing some of those share
spk_47: against the last year and you know a follow up to that is gonna be a question on your promotional strategies you know you talked a lot about be more surgical with promotion believe gives us an update on the progress that you have made and i was curious to see if there's anything to share that interesting under behavior at some of our customers that you have a choir
spk_52: over the last flock to keep month
spk_3: yeah so on the marketshare games up i think you know first we we had of our last quarter for the last he was twenty six percent id so we're laughing a very strong quarter and i've been pleasantly surprised that on top of that quarter we're gaining market share and double check gates have been steady i look at it every week and and it's been steady
spk_53: and we've we finally we feel like we won both holidays in quarter one for gay and so we feel good about that
spk_0: with regard to you had a question or knob customer behaviors or the customer behaviors weird with the new customers i think it's a lot of customers week brought in the got into e ecommerce or some other customers be brought in be brought in to the vaccinations got smaller portion are and what we're seeing day
spk_54: it is our that the customers that out that the most excited about who are coming to ecommerce and then engage also and are stored in a basement a lot more with us a lot more without sin
spk_42: and the customer behavior for the other night and that's about that that's the the broad message that give you on behave as yet another question though
spk_23: give one other oh promotional ah yeah
spk_3: a promotion yes you know if you if you look around our markets you'll notice a couple of things what is that we have fewer promotions in our flyers are smaller out at least the physical side of what you see and you'll see that more for promotions have gone digital and when you go digital you'll see that more for promotions up personalized to the individual and so that from abroad reach perspective and then underlying that we talk about a promotion technology that we have which is now implemented fully ah that makes sure that we don't waste promotions and so that this notion of being surgical and digital is our only getting better you gotta the top floor and then i had a fellow question on digital sales of the two years that was still very strong but it did decelerate or says the fourth quarter so my question is around your expectations for the balance of the year and if this kind of level in the to your stack basis is what you're expecting going forward now as consumers are and creasing i coming back to the store i think you are let's break down the to your stock i just want to be sure that you take away from there a couple of components that are still growing drive up and goes growing do seventy five percent traffic and naughty commerce business is still up even over twenty twenty so what you're seeing is relative to a very very significant bask
spk_55: uptick in que one to eighty twenty in are you seem that come down which is why the numbers look that way okay i suspect what will happen is if you keep the same traffic them of the baskets got smaller as you went through the yard people ended up not panic buying like they did
spk_3: i think you'll see these numbers coming back up because the traffic is still staying positive great thank you so much
spk_23: next question the term robert must go with credit suisse please go ahead i robert i'd thanks for the question
spk_56: i want to know the that can be could share a little bit about where you're learning to been so far on and that sees i as an outsider it it looks like your approach to this is is kind of cautious your kind of testing and learning don't know what what have you learned about
spk_23: the operational effectiveness it can give you an and what are that the challenges they pose
spk_49: yeah
spk_3: so you're right we're we are cautious in the sense that a part of the trick on damage to his first learning how to operate it and connected to what's happening in the store recognize that what you're trying to do in the nfc a strike you're trying to pick as much as you can from the nfc and then thick the tail from the store so that you don't lose the specialness of what do you get the customer from a store a bouquet of flowers so special special cut of meat and so on but what really gotta pick all of your poor fast moving items in the middle of the store supposed to how do you integrated how do you integrate orders because one stores not covering six seven stores how do you think about the mix especially if you're if you're reading by store so there's a lot of learning on that there's a lot of learning also on just the algorithm that continues to learn to optimize the mentoring the nfc so you can increase the pick time does learning and that answer and it's a lot it's a lot of software that has to connect to the rest of the system you know the ordering stuff for the overall business and so on so we're learning a lot of those things the second learning they're going to is how to configure it you know we've got to that are connected to a store
spk_57: we're going to open another one that's not so connected to a store
spk_35: we're exploring whether we should open a complete dark one right so there are different options and these different things fit in different markets and so we got a test that to the rest of this year
spk_0: and then i think we have enough
spk_58: to have learned a few prototypes that we can start scaling quickly or so that's the journey were going to robert it's up our and and a nice thing about it is that i talked about the optionality there's no need to have to punch out one hundred of these quickly or because the business is still going with the with the base of the store and buy time it gets to sufficient scale will have this figure it out
spk_14: got it and i'll i'll exercise one more call appear and he said that you want to be very active and emma day and and that you're good at it
spk_3: what are you seeing in terms of deal flow coming across your desk the audit these we shall stores got a bit of a lifeline from kobe i'm sure their sales or are good so does that mean that there's few words opportunities to the buy or as is a different than that is the been is up you know it i think it was higher because it would it that way i think we're gonna have to be patient and addict opportunities will come ah and up had actually that's good because it gives us a tremendous opportunity to modernized every aspect of our business learn how to leverage a customer data learn how to like technology everywhere you know how to learn learn how to ah
spk_58: how to become personalized and an extremely surgical and so we so that we can get even more synergies when we do it so that's how we had with where have we been patient and rather than to to build our business okay great thanks for the question
spk_59: can we have time for two more questions
spk_0: the next caller is joe feldman with chelsea thank you do please go ahead
spk_60: a job hey guys thanks hi how are you think for taking the question lot of mine have been answered and and that
spk_61: asked to take a bit more they to prepared meals
spk_62: and the you know if it nine assists the expansion in what you're seeing and i recall the recent changes that you did make to that to the prepared meals program in some things in the stores retry to packaged things more are you going to go back to the gunners i guess that that the salad bar type of are prepared meal plan or
spk_60: as you go yeah yeah good good question so many separate do things okay joe one is a salad bars wing bars and all of those things that we had we pandemic you know and the amazing thing about job and you have these the substances a learn a lot and and so we have those back but we bring those back of with
spk_63: and of deliberately so if you go to some markets you'll see that we brought back the wing but because in that in those markets gotta be sell more when you put it when you leave it in bulk and does that freshness component those the people believe to if is not going to be cook it into stores that they see all of that
spk_60: in some markets we've opened a salad bars and we're having good success with the so we're gonna bring some other than some of those were not bring back at all right down because customers have just switched habits to having it's packaged be packaged for them the means programs different the meals program what they're trying to do to give people the option of having means that web that products that were prepared in store taking it home and be adding a great meal and fifteen minutes in another right and that's working really well for us it's you can't do that if you don't have a tremendous presence and fresh and and if you don't have a better understood cut your meet the way as so that it's done that morning for you and be rolling that i miss having great success
spk_3: within our what i'm proud of the teams they're also learn how to manage to shrink with it which is the most difficult part of that old bird process that that's really helpful thanks and mismanagement i'll pass it on thank you
spk_49: and last question
spk_3: sls question of telly danielle with the ammo capital of please go ahead i kelly hi good morning good morning things for sitting in
spk_6: was just one click things and one clarification question and then another one on wages and it's curious if you can so much and moving parts in the numbers right now
spk_35: with kids even help us and a breakdown that to your stack of sixteen and a half between volume price and mix and and trade up as you can for any kind of numbers around that maybe on it to your status
spk_0: just the weekend and kind of interest understand the underlying components there and then also just on wages

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