Albertsons Companies, Inc.

Welcome to the Albertsons Company's fourth quarter and fiscal year 2021 earnings conference call, and thank you for standing by. All participants will be in 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 fourth quarter and and fiscal year 2021 earnings conference call. With me today are Vivek Shankaran, our CEO, and Sharon McCollum, our president and CFO. Today, Vivek will share insights into our fourth quarter results, as well as review our progress against our strategic priorities. Sharon will then go into the financial details before Vivek and Sharon provide a discussion on our priorities and outlook for fiscal 2022. 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 10-Q, 10-K, and 8-K. 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-gap measures, and historical financial information includes a reconciliation of net income to adjusted net income and adjusted EBITDA. And with that, I will hand the call over to Vivek.

Thanks, Melissa. Good morning, everyone, and thanks for joining us today. In the fourth quarter, our teams continued to drive top-tier operating and financial performance. We want to recognize and thank all of our retail, distribution, and manufacturing teams for their commitment to and care of our customers and their communities. We're proud of the compassion, humility, and passion for excellence they have shown in an exceptionally challenging environment over the last two years. In Q4 21, ID sales increased 7.5% and 19.3% on a two-year stack. We also gained unit and dollar market share in food and MULO on both a one and two year basis and maintained our number one or number two position in 68% of the 121 MSAs in which we operate. In addition, we delivered adjusted EBITDA of approximately $1.1 billion and adjusted EPS of 75 cents per share, well ahead of our expectations. During the quarter, we continued to see a rebound in store traffic and the benefits from our digital and omnichannel investments, including the expansion of drive-up-and-go and additional micro-fulfillment centers, bringing our total MFCs to seven. Omnichannel households spent three times more than in-store-only shoppers. And during Q4, omnichannel households grew by nearly five times versus the fourth quarter of 2019. In addition, as our investments drove increased customer engagement and retention, Q421 digital saves increased 5% year-over-year and 287% on a two-year stack basis. In the Just For You loyalty program, benefit enhancements continued to accelerate membership growth, which increased 18% year-over-year to nearly 30 million members and is up approximately 45% or over 9 million members since the fourth quarter of 2019. Actively engaged members, defined as those redeeming coupons, fuel or grocery rewards, also continued to increase. And the retention rate of these members remained over 90% at the end of the year. Remember that on average, actively engaged members spend four times more than non-actively engaged customers. I will now recap our progress against the four key strategic priorities that drove our better-than-expected Q4 and 2021 results. Driving in-store excellence is the foundation that enables everything we do, and our commitment to enhancing our customers' experience contributed meaningfully to the 18% year-over-year growth in our Just For You members and market share gains. From an inventory and productivity perspective, we simplified tasks and automated production planning in our fresh departments, resulting in higher in-stock conditions and more time for customer interactions. For example, in the deli, we installed auto slicers and stackers and implemented production planning tools that increase product availability while reducing shrink and improve customer service. These changes contributed to the better-than-expected results in fresh. During the fourth quarter, fresh ID sales outpaced center store by 280 basis points year-over-year and over 500 basis points versus two years ago. In addition, we continue to invest and modernize our store fleet, including adding and upgrading self-checkout, which is now available in over 1,800 stores. and optimizing the layout and design to improve the customer shopping experience. We completed 236 remodels and opened 10 new stores in fiscal 2021. In own brands, we introduced 837 new products and increased adoption in lower penetrated divisions, driving strong growth and improved margins. Q4 sales penetration reached 25.6%, with the strongest performance in floral, deli, and meat. During the year, All Brands was awarded four Private Label Manufacturing Association Awards and won recognition from Store Brands Magazine for innovation in private brand marketing. Our next priority is the acceleration of our digital and omni-channel capabilities to fuel our growth and increase customer engagement, satisfaction, and retention. In loyalty, we launched and upscaled our new unified mobile app, or UMA. 87% of our digital orders were being placed in the UMA by the end of the fiscal year. We also introduced a meat planning tool that offers recipes, including those that address dietary preferences, such as vegetarian or gluten-free. Customers can seamlessly add all recipe ingredients to their shopping list, or immediately purchase them in the UMA. In Drive Up and Go, we reached our goal of over 2,000 stores serving 99% of our households. In online delivery, we expanded third-party partnerships to offer more choices and accelerate the speed of delivery. And in both Drive Up and Go and online delivery, we reduced cost per order by adding five additional NFCs and three wear rooms. reconfiguring our picking software and staffing models, and improving our forecasting algorithms. In digital, we are beginning to capitalize on our rich and proprietary data, recently launching the Albertsons Media Collective, or AMC. AMC offers existing business partners a robust digital marketing platform that reaches our extensive customer network and leverages our strong market share especially in the 68% of markets where we hold the number one or number two share position. We expect AMC to be a leading growth and profit driver over the next several years. Increasing productivity, our next priority, allowed us to continue to fund future growth and offset inflation. In the second year of our three-year $1.5 billion savings program, we enhanced our pricing and promotion capabilities, further rationalized indirect spend, and expanded our national buying initiatives. We expect to achieve our targeted $1.5 billion in savings by the end of fiscal year 2022. And we will not stop there. Later in this call, we will discuss the next phase of our perpetual productivity engine beyond fiscal year 22. Our fourth priority is strengthening our talent and culture and supporting the communities we serve. In 2021, we continue to acquire and develop talent, to transform the culture, to harness local ownership, leverage scale, and support our new omnichannel imperatives. We also recognize the frontline teams for embracing this cultural transformation while delivering exceptional service to our customers by awarding a discretionary thank you payment in the fourth quarter. Our senior leadership team also focus on amplifying our diversity, equity, and inclusion strategy. We are continuing to make progress at the senior levels of the company and are benefiting from the experience and diversity of thought that each of these leaders is bringing to the table. In pharmacy, our teams work tirelessly to provide COVID vaccinations to the communities we serve. To date, we have administered over 12 million vaccinations. In ESG, we increased investment and further developed our goals in the areas of climate action, waste reduction and circularity, community stewardship, and diversity, equity, and inclusion. Later this month, in conjunction with Earth Day, we will announce this comprehensive set of goals publicly. We are very pleased with the progress we've made against all our strategic priorities, and there remains significant headroom and a strong foundation to build on in 2022. I will now turn the call over to Sharon to cover the details of our fourth quarter and fiscal year results.