Albertsons Q3 2024: Digital Sales Rise, Retail Media Presents Opportunity

Albertsons experienced a modest third quarter in 2024, marked by growth in digital sales, loyalty memberships, and advancements in retail media. The company’s strategic focus on its Customers for Life initiative continues to drive its operational and financial success.

Q3 2024 Performance

• Net sales increased 1.2% year-over-year to $18.8 billion, driven by strong pharmacy sales.
• Identical sales (ID sales) rose 2%, primarily due to:
  • 3% growth in pharmacy sales.
  • 23% surge in digital sales, fueled by first-party innovation and improved service levels.
• Lower fuel sales partially offset the overall net sales growth.
• Comparable sales increased 0.3%, while comparable store sales declined 1.9%.
• Loyalty membership grew 15% to 44.3 million members.
• Quarterly dividend increased by 25%.
• Investments in e-commerce drove sales penetration to 7%, with top-performing markets exceeding 9%.
• The company expects 30% of distribution volume to be automated, with full Warehouse Management System (WMS) implementation company-wide.

Omnichannel Capabilities

Albertsons’ digital sales surged 23%, contributing to 7% of grocery revenue, with top-performing markets exceeding 9% penetration. This growth has been driven by investments in e-commerce, first-party innovation, and enhanced services like DriveUp & Go and in-home delivery. The company’s integrated mobile app, featuring geo-location capabilities, has further enhanced quality, speed, and convenience for customers.

As highlighted by Grocery Doppio, the path to profitability for grocers lies in becoming a digital-first business with robust omnichannel components. Albertsons is focusing on four key areas to enhance its digital capabilities: e-commerce, loyalty apps, mobile app integration for in-store use, and digital platforms for pharmacy and health. With pharmacy leading identical sales rather than the core grocery segment, these strategic investments are expected to significantly improve digital sales. Currently, Albertsons’ first-party digital sales penetration stands at 7%, and according to Grocery Doppio’s State of Digital Profitability report, digital sales are projected to reach 13.6% by 2025. While there is much ground to cover, the company remains committed to achieving this growth.

Loyalty Program

Albertsons has achieved significant growth in its loyalty program. In Q2 2024, the loyalty membership base grew 15%, reaching 43 million members, and by Q3, this number had increased to 44.3 million members. The loyalty program, integrated into the company’s mobile app, serves as a crucial engagement tool and an entry point for digital and personalized marketing. It also plays a key role in contributing data to Albertsons Media Collective, the retailer’s in-house retail media unit.

In April 2024, Albertsons launched a simplified and enriched loyalty program designed to make it easier for customers to earn and redeem rewards. Customers can now seamlessly access coupons, fuel discounts, and grocery rewards, further boosting engagement and satisfaction.

Retail Media Growth

Albertsons Media Collective, the retailer’s in-house digital media unit, has been outpacing the broader digital media industry and represents "one of the largest opportunities to fuel reinvestment into our business," according to CEO Vivek Sankaran. Albertsons has rolled out advanced technology that delivers coupons to shoppers based on their in-store location. This service is expected to engage more than 8 million shoppers by the end of the fiscal year.

The retailer has also launched a digital advertising campaign promoting its e-commerce services through short, impactful videos designed for social media platforms like YouTube and Instagram. These six- or 15-second videos showcase the convenience and value Albertsons provides to online shoppers. In addition to social media, the campaign is being extended to streaming audio and digital out-of-home services.

The retail media business, brought in-house in 2022, has shown significant growth and is poised to become a substantial revenue contributor over the next three years. As Grocery Doppio highlights, the retail media sector represents an $8.5 billion opportunity for grocers by 2025. Additionally, in Grocery Doppio’s October 2024 State of Digital Performance Scorecard, 63% of grocers reported increasing their digital communications and promotions during Q3 2024.

One of the top drivers of influence in digital marketing has been digital coupons, which were identified by 82% of respondents in the H1 2024 Grocery Digital Benchmark as a criical tool. Moreover, 69% of grocers agreed that digital coupons significantly enhance customer engagement and drive sales. Albertsons’ continued investment in digital couponing and promotional technology positions it as a leader in leveraging these tools for sustained growth.

‍Store Closures and Operational Improvements 

Albertsons remains focused on optimizing its real estate portfolio to align with evolving consumer behaviors and technological advancements. According to COO Sharon McCollam, the retailer may elect to close more stores in the coming years as part of its “general hygiene of the real estate portfolio,” a process that was previously hampered by the merger review. Despite this, Albertsons sees potential for growth by opening new stores in targeted markets, though specific locations have not been disclosed.

In the first 28 weeks of fiscal 2024, Albertsons completed 44 store remodels and opened two new stores. These efforts align with changing consumer preferences and advancements in AI, as detailed in Grocery Doppio’s article, "The Small Format Revolution Shaping the Future of Grocery Retail." By integrating AI-driven technologies such as prompts for missed scans, Albertsons has successfully reduced inventory shrinkage while enhancing both the customer and associate experience. In produce departments, expanded technology use has driven increased sales, improved product quality, reduced shrinkage, and enhanced labor productivity.

Future Outlook

• Identical sales growth forecast revised to 1.8% to 2.0% (from 1.8% to 2.2%).
• Plans to deliver $1.5 billion in savings over three years to enhance customer value, support growth initiatives, and mitigate inflationary pressures.

Conclusion

Albertsons’ Customers for Life Strategy underpins its continued success, driving growth in digital sales, loyalty programs, and retail media. With investments in digital-first strategies and operational improvements, the retailer is poised for sustained profitability and a strengthened market position.

‍