Albertsons Companies, Inc.

Greetings and welcome to the Albertsons Company's first quarter 2025 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 Cody Perdue, Senior Vice President, Treasury, Investor Relations and Risk Management. Please go ahead, sir.

Good morning. Good morning. And thank you for joining us for the Albertsons Company's first quarter 2025 earnings conference call. With me today are Susan Morris, our CEO, and Sharon McCollum, our president and CFO. Today, Susan will recap the first quarter of 2025 and update you on our progress against our strategic priorities. Then, Sharon will provide the details related to our first quarter 2025 financial results and our outlook for the remainder of fiscal 2025. before handing it back to Susan for closing remarks. After management comments, we will conduct Q&A session. I would like to remind you that management may make forward-looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in our findings with the SEC, 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. Additionally, we will be discussing certain non-GAAP financial measures. A reconciliation of these financial measures to the most directly comparable GAAP financial measures can be found in this morning's earnings release. And with that, I will hand the call over to Susan.

Thanks, Cody. Good morning, everyone, and thanks for joining us today. In the first quarter, our teams delivered solid results with IT sales growth of 2.8%, adjusted EBITDA of $1.11 billion, and adjusted earnings per share of 55%. These results, again, demonstrate gradual and incremental progress against our five strategic priorities, which include driving customer growth and engagement through digital connection, growing our media collectives, enhancing the customer value proposition, modernizing capabilities through technology, and driving transformational productivity. Within these priorities, our four digital platforms continue to be the catalyst for customer growth and engagement. We continue to drive increased sales and to more deeply engage our most loyal customers, all while generating data and insights for the media collective. Our first digital platform is e-commerce, which grew 25%. and reached 9% of total grocery revenue in the first quarter. This growth was again led by strong performance in our first-party business, driven by award-winning capabilities in our fully integrated mobile app, and supported by our five-star certification program. Our focus on delivering exceptional customer service experience is fueling new customer acquisition and strengthening existing customer retention. To do this, we're continuing to enhance our digital shopping experience. including the introduction of AI and interactive features that deliver both ease and convenience. For example, we launched our new Shop Assist feature, which enables a connected shopping experience that allows customers to communicate back and forth with our in-store associates throughout their orders fulfillment process. We've also created more flexibility in our basket building. Customers can now add items to their orders up until picking has started. recognizing that shoppers often think of one more item they need just after an order is placed. While our e-commerce penetration is still low industry peers, it is one of our biggest growth, customer acquisition, and customer retention opportunities for 2025 and beyond. From a profitability perspective, our e-commerce business is near break-even and improving. Our second digital platform is Loyalty, which grew 14% to 47 million members in the first quarter, as we capitalize on simplification of our program and further enhance the value the program offers. Members in the program today are engaging more frequently, using more of our easy-to-understand and redeem features, and spending more with us. As taken point, 30% of our engaged households are now electing the cash-off option, reinforcing the customer's desire for immediate value. As we did last quarter, loyalty is a key enabler of digital customer engagement. and a rich source of data for our media collective. Throughout 2025, we will continue to introduce compelling benefits that will attract new members, improve share of wallet, and further enable marketing and monetization opportunities for the media collective. We will also continue to simplify and expand the program to include strategic partnerships to offer even more value. Our third digital platform is pharmacy and health, which grew 20% year over year, driven by industry-leading script and immunization growth, best-in-class customer satisfaction scores, and the ongoing integration of pharmacy and sincerely health into our overall digital experience. Cross-shoppers between grocery and pharmacy are exceptionally valuable. Over time, these customers visit the store four times more often and buy significantly more groceries with us, resulting in outsized customer lifetime value across the entire store. For this reason, in addition to the market share opportunity competitor closings are creating for us, we're also continuing to invest in our pharmacy and health digital platform. Through this platform, we're also launching customized omni-channel benefits that are not only attracting new customers, but also converting existing pharmacy and grocery-only customers to become crop shoppers. It is also helping customers to find new and personalized ways to improve their health and well-being consistent with evolving national trends. Our pharmacy and health platform is an integral part of our customers for life strategy and a significant growth and customer engagement opportunity. For this reason, leveraging our growing scale to improve pharmacy profitability over time is a key operational priority. To deliver this, we are continuing to pursue higher margin service offering and drive productivity through improved sourcing, increased automation, and labor optimization. This quarter, we opened our third central bill processing facility, which is reducing our cost to serve while at the same time improving overall customer experience. The fourth usual platform is the integration of the mobile app for use in our stores. We're not just selling food. We're simplifying meal planning and making shopping easier and more convenient both in-store and online. RF has become the epicenter of the omni-channel experience, with digital customers engaging nearly three times a week on average. What began as a tool for enabling e-commerce and delivering great deals is now a swift organization of tools that makes customers' lives easier regardless of whether they're shopping in our stores or online. These tools include best-in-class list building and personalized meal planning capabilities, powerful search and product locating capabilities, and an in-store mode that connects meal planning and other store-specific capabilities. In our media collective in the first quarter, we significantly increased the high-impact digital inventory as our digital platforms work together to enrich our data and generate deeper customer engagement to accelerate growth and deliver superior return on ad spend. We'll continue to invest in building industry-leading integrated solutions that will support both endemic and non-endemic partners. These solutions include refining shopper audiences, running targeted media campaigns with compressed measurement timelines, and delivering consistent omni-execution to develop personalized relationships for our collective partners with our customers. These same solutions are also providing benefits for our internal loyalty and marketing initiatives. As we look forward, we expect the collective to grow faster than the retail media market and ultimately be one of the largest sources of fuel for reinvestment, into our core business over time. To improve our customer value proposition, we intentionally invested in value, in both loyalty and promotional offerings, as well as by partnering with strategic vendors to invest in price in certain categories in certain markets. We also surgically managed through the pass-through of cost inflation to further invest in the customer's needs for immediate value. While they do this early, These investments did deliver a sequential quarterly unit sales improvement and over time are expected to drive greater existing and new customer engagement across our banners. We additionally amplified our own brand's presence to drive further value for our customers. Own brand sales penetration finished the quarter at 25.7% as we launched new offerings across multiple categories. We also expanded the assortment in our recently introduced Overjoyed brand, and launched our newest brand, Chef Counter, a chef-inspired meal solution targeting foodies seeking fast and easy restaurant-quality choices at affordable prices. These launches, coupled with greater prominence and better value in OMRAN merchandising, is expected to drive greater loyalty, increase digital and omni-channel household engagement, and higher transaction counts over time. Our next priority is the modernization of our capabilities through technology. As we said last quarter, our North Star is to use technology in everything we do, and we are energized by the progress we are making toward this aspiration. Our technology-first focus is positioning us to make a greater impact faster, allowing us to drive greater innovation at a lower cost. Our advanced technology platform, on which we are continuing to innovate, powers our e-commerce, store, pharmacy, supply chain, merchandising, and media collective operations and is allowing us to leverage emerging AI technologies to accelerate our operational transformation going forward. We are also using our advanced capabilities to use AI agents to enhance many business functions, including pricing and promotion, personalization, customer care, and co-generation, among others. Threatening transformational productivity is our next priority, which is an imperative to fuel our growth. Our productivity engine continues to reduce costs, offset headwinds, and fund our growth priorities. It works hand-in-hand with our technology modernization, including our initiatives to leverage AI and data analytics, optimize supply chain costs through automation, and build up shrink and labor management tools, to name a few. In addition, the largest of our opportunities continues to be the leveraging of our consolidated scale to buy goods for resale through national lines and more efficient supplier relationships. As we previously shared, from fiscal year 2025 through 2027, we expect our productivity engine to deliver $1.5 billion in savings, which we plan to reinvest in growth and our customer value proposition, as well as to offset other inflationary headwinds. Before I hand the call over to Sharon for an overview of our first quarter and to provide an update to our 2025 outlook, I'd like to give you an update on recent labor negotiations. In fiscal 25, we have negotiations covering approximately 120,000 associates. As of today, we've reached agreements covering nearly half of these associates, with two pending ratifications in Colorado and Southern California. We appreciate and value our associates, and in these contracts, we are meaningfully improving wages and benefits. At the same time, we're working to negotiate contracts that are not only financially viable, but also provide the operational flexibility the company needs to streamline operations, manage costs, and offer affordable prices in a rapidly changing grocery landscape. Sharon, over to you.