Incremental flow-through (ACI)
Albertsons reported Q4 EPS of $.60 vs. consensus expectations of $.51. ID sales were +11.8%, decelerating from 12.3% sequentially, but above consensus expectations of 10.6%. Digital sales grew by 282%. Drive-Up & Go grew over 1,000% in Q4 and will be in 98% of the store base by year-end. Management said the flow-through from the curbside pick-up offering is in the mid to high single digits. Gross margins expanded 30bps and excluding fuel expanded 10bps driven by improvements in shrink and sales leverage offset by digital investments and strategic investments in price. Albertsons’ own brand penetration exceeded 25% in the quarter. SG&A was 80bps lower as a percentage of sales. The EBITDA flow-through was roughly 15% for the total company.
Management guided ID sales to be down 6 to 7.5% for F2021, bracketing consensus expectations. EPS is guided to be between $1.95-2.05, above consensus expectations of $1.86. Compared to 2019, sales are expected to 9.5-11% on a two-year stacked basis, while EBITDA is expected to grow at a 13% two-year CAGR. Gross margins for the year are expected to be stable compared to 2020. Sales trends so far in FQ1 are trending similarly to the rate exiting Q4. Management is planning on inflation of 1-2% this year.
Much of management’s reason to dedicate more resources to curbside pick-up is the incrementality of the sales. The flow-through appears to be a third of store margins. When sales pull back as consumers eat more away from home, digital sales will no longer be incremental but cannibalizing. Shrink, and sales leverage will be headwinds instead of tailwinds. Promotions have already begun to intensify. With those headwinds, a flat gross margin would be heroic.
On-premise beer poured (BUD)
According to BeerBoard, which tracks $1B in draft sales nationwide, the open rate remained 92% for establishments open and pouring beer for the weekend of April 22-25. The open rate has been 92% for the previous four reporting periods going back to Feb. 25-28, as seen in the following chart. The closed 8% may represent businesses that have permanently closed during the pandemic. Data essential reports that about 10% of the 778,807 restaurants existed before the pandemic closed for good.
Nationally the volume of beer poured compared to 2019 was 36% lower. Compared to the weekend of April 8-11, the volume was up 2.6%. The volume poured in Florida was 33% lower than in 2019, while Texas was 32% lower. On the other end, Minnesota’s volume was 66% lower while Illinois was 51% lower. The volume share for imports was the same as the previous reporting period of April 8-11 at 15.9%, while craft gained 1% to 32.6% and domestic lost 1% to 51.5%.
BSPE merger update
Bespoke Capital Acquisition Corp. provided a merger update yesterday. Wasatch is adding $100M in equity investment to its previous $28M purchase of shares. The Wasatch purchase was not part of a PIPE but purchasing shares from current shareholders. The cornerstone investment is a positive development before the merger closing. Shareholders have the right until May 3rd to redeem their shares, and May 6 will be the shareholder meeting to vote on the transaction. There will be one last opportunity to redeem shares 21 days after the SEC declares the registration statement effective.
Albertsons mentioned that wine sales continue to be strong even after lapping the pandemic as consumers continue to have more meals at home. Selling controlled brands at grocery stores is about one-third of Vintage Wine Estate’s sales. Bespoke Capital Acquisition Corp. is on our long list.
