Albertsons Companies, Inc.

Welcome to the Albertsons Company's third quarter 2021 earnings conference call, and thank you for standing by. All participants will be in a listen-only mode until the Q&A session. This call is being recorded. I would like to hand the call over to Melissa Plaisance, Senior Vice President, Investor Relations, Treasury, and Risk Management. Please go ahead.

Good morning, and thank you for joining us for the Albertsons Company's third quarter earnings 2021 Earnings Conference Call. With me today from the company are Vivek Shankaran, our CEO, and Sharon McCollum, our President and CFO. Today, Vivek will share insights into our third quarter results, as well as review our progress against our strategic priorities. Sharon will then go into the financial details of our third quarter, as well as updated full year 2021 outlook, before handing it back over to Vivek for some closing remarks. After the prepared remarks, we will conduct a Q&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 securities laws. Forward-looking statements are not limited to historical facts but contain information about future operating or financial performance. Forward-looking statements are based on our current expectations and assumptions and involve risks and uncertainties that could cause actual results or events to be materially different from those anticipated. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements are and will be contained from time to time in our SEC filings, including on forms 10Q, 10K, and 8K. 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 information, future events, or otherwise. Please keep in mind that included in the financial statements and management's prepared remarks are certain non-GAAP measures, and the historical financial information includes a reconciliation of net income to adjusted net income and adjusted EBITDA. And with that, I'll hand the call over to Vivek.

Thanks, Melissa. Good morning, everyone, and thanks for joining us today. Before we begin, we want to thank our retail, distribution center, and manufacturing teams for their commitment to safety and passion for serving our customers, even as COVID-19 cases continue to rise once again. We also want to thank our pharmacy teams who have administered 11 million COVID-19 vaccines, including approximately 3 million in quarter three. Sharon will talk more later about our updated expectations in light of COVID-19's developments, continued inflationary pressures, and momentum in our business. But before she does, let me share with you some details from our third quarter. In Q3 2021, ID sales increased 5.2% and 17.5% on a two-year stack. We also gained unit and dollar market share in food and new low on both a one- and two-year basis. In addition, we delivered adjusted EBITDA dollars of $1.05 billion and adjusted EPS of 79 cents per share, well ahead of our expectations. Also during the quarter, we continued to see the benefits from our digital and omnichannel investments, including the ongoing expansion of Drive Up and Go and the opening of our first Midwest micro-fulfillment center. Q321 digital sales increased 9% year-over-year and 234% on a two-year stack basis. Omnichannel households increased by four times versus Q319, and sales retention remained strong. As omnichannel households spend three times more than in-store-only shoppers, we continued to increase our investments in digital, omnichannel, and loyalty, which drove increased identified households and higher customer engagement and retention. In the Just For You loyalty program, ongoing benefit enhancements continued to accelerate membership growth, which increased 17% year-over-year to 28 million members, and actively engaged members continued to increase. Actively engaged members are defined as those that are redeeming fuel or grocery rewards and on average spend four times more than non-active members. In addition, the retention rate of actively engaged members continues to be over 93%. Collectively, these results demonstrate the momentum being driven by our transformation strategy and the benefits of a strong consumer backdrop. I will now update you on our progress within the four key elements of this strategy. Driving in-store excellence, accelerating our digital and omnichannel capabilities, increasing productivity, and strengthening our talent and culture. Driving in-store excellence anchors everything else we do, and our commitment to enhancing our customers' experience continues to drive innovation and transformation. This year, as customers consume more meals at home, elevating our fresh offerings and introducing new technologies were a top priority. To this end, we have been automating production planning and simplifying tasks in our fresh departments, resulting in better quality, higher in stocks, and more time for customer interactions. These actions are continuing to drive better than expected results in fresh. And during the third quarter, fresh ID sales outpaced center store by 500 basis points year over year and over 400 basis points versus two years ago we're also providing mobile tablets to store management to review daily sales schematics orders and provide associate training this allows store management to spend more time on the sales floor assisting customers ensuring improved store conditions and interacting with and training employees. In addition, we also are continuing to invest in our stores, completing 146 remodels and opening nine new stores through the end of the third quarter. At Own Brands, the introduction of new products, as well as the rollout into Albertson's legacy divisions, continues to drive strong growth and improved margins. Q3 sales penetration increased 15 basis points year-over-year to 25.1%, with the strongest performance in the floral, deli, and food service departments. Year-to-date, we have launched 540 new products, including 143 in the third quarter, and are on track to launch over 800 this year. Our next priority is the acceleration of our digital and omnichannel capabilities. This digital transformation is designed to fuel our growth as we aim to drive increasing customer engagement, customer satisfaction, and customer retention through an area of convenient shopping experiences. For example, in loyalty, our new unified mobile app consolidates the customer's entire digital experience into one place where they can shop, download deals, request pharmacy services, and utilize gas and grocery rewards. Since the launch, we are seeing increasing downloads, higher traffic, and deeper customer engagement. In Drive Up and Go, we expanded our store count in Q3 and now cover 96% of our households with first-party pickup offerings. We also rolled out faster pickup options. And heading into the fourth quarter, over 80% of our households are now able to receive their Drive Up and Go orders in two hours. In online delivery, we have established several third-party partnerships to meet the differing needs of our customers. Through these partnerships, we're able to accelerate the speed of delivery while reducing delivery cost per order and allow customers to combine our delivery with an additional delivery from another retailer or restaurant in one trip through Double Dash. We're also testing other new experimental pilots and concepts for last-mile delivery. In parallel to the rollout of our digital and omnichannel capabilities, we're also building a digital marketing platform that will allow our customers to engage with the food and brands they love. In November, we announced the launch of the Albertsons Media Collective, a retail media network that will offer business partners a digital marketing platform and omnichannel solutions to reach our extensive customer network. To offset the cost of inflation, and fund future investment, our next priority is to continue to identify and drive productivity across all disciplines in our business. During the quarter, we continue to benefit from the retail and supply chain operations, merchandising, and procurement initiatives that we have previously laid out, and we continue to expect to achieve the targeted $1.5 billion in annual gross savings by the end of fiscal year 2022. Our fourth priority is strengthening our talent and culture and supporting the communities we serve. To find ways to enhance culture, our senior leadership recently conducted listening tours in our stores to personally connect with our frontline associates. In addition, we conducted another associate experience survey across the organization to gather what we are doing well and what we can do to create an even better work environment and culture. and are taking actions based on that feedback. Our pharmacy team also continues to serve our communities with an array of services, including the COVID and flu vaccines. To date, the pharmacy team has administered 11 million COVID vaccine doses. To enable the delivery of 37 million healthy breakfast to those in need, we collected $9 million, thanks to the generosity of our customers, and at Thanksgiving, another 100,000 meals were provided to those in need with the help of one of our third-party delivery partners. Due to our efforts in own brands, for the fourth consecutive year, we were awarded the EPA Safer Choice Partner Award for achievement in the design, manufacture, selection, and use of products with safer chemicals. We also earned recognition in transportation as a top green fleet in 2021, from heavy duty trucking for our 100% zero emissions refrigerated grocery delivery trucks. We are also continuing to install energy efficiency and refrigeration upgrades and have installed these in over 700 stores through Q3 21. We also continue to take actions related to ESG and sustainability and are focused on a comprehensive set of goals in areas including climate action, waste reduction and circularity, community stewardship, and diversity, equity, and inclusion. And now I will turn to Sharon to provide remarks and cover the details of our third quarter fiscal results and outlook.