Business context and reporting period
Albertsons Companies, Inc. operates grocery and drug stores, pharmacies, fuel centers, manufacturing and digital channels. This Form 10-K covers fiscal 2021, the 52 weeks ended February 26, 2022, and compares it principally with the 52 weeks ended February 27, 2021. Although the request identifies “2020 Q4,” the filing is an annual report for fiscal 2021; it does not provide a clear standalone fourth-quarter income statement or cash-flow summary.
At year-end, Albertsons operated 2,276 stores across 34 states and Washington, D.C. The company reports one segment.
Financial and operating performance
| Metric | Fiscal 2021 | Fiscal 2020 |
|---|---|---|
| Net sales and other revenue | $71.887 billion | $69.690 billion |
| Gross margin | $20.722 billion; 28.8% of sales | $20.415 billion; 29.3% |
| Operating income | $2.437 billion | $1.618 billion |
| Net income | $1.620 billion; diluted EPS $2.70 | $850 million; diluted EPS $1.47 |
| Adjusted net income (non-GAAP) | $1.781 billion; adjusted diluted EPS $3.07 | $1.891 billion; adjusted diluted EPS $3.24 |
| Adjusted EBITDA (non-GAAP) | $4.398 billion; 6.1% of sales | $4.524 billion; 6.5% |
| Cash from operations | $3.513 billion | $3.903 billion |
Cash and cash equivalents were $2.902 billion at February 26, 2022; cash, cash equivalents and restricted cash totaled $2.953 billion. Capital expenditures, excluding lease buyouts, were approximately $1.595 billion. Total debt including finance leases was $7.965 billion, down from $8.314 billion; the reported net debt ratio was 1.2x, versus 1.5x a year earlier. The $4.0 billion asset-based revolving credit facility had no borrowings outstanding and approximately $3.751 billion of availability, net of letters of credit.
Material changes versus the prior comparable year
- Sales grew 3.2%, mainly from higher fuel sales and sales at new and acquired stores. Identical sales excluding fuel fell 0.1%, following 16.9% growth in fiscal 2020; the company cites unusually elevated pandemic demand at the start of fiscal 2020. Two-year stacked identical sales growth was 16.8%.
- Digital sales increased 5% year over year and 263% on a two-year stacked basis. The company expanded curbside pickup to more than 2,000 locations.
- Gross margin rate declined 50 basis points, primarily reflecting inflation-related product and supply-chain cost pressure and fuel mix. Excluding fuel, the rate increased 5 basis points.
- Operating income and GAAP net income rose, while Adjusted EBITDA and adjusted net income declined. Fiscal 2020 adjusted results included a large pension-plan withdrawal charge; fiscal 2021 included a pension-related gain, so non-GAAP adjustments affect comparability.
- Operating cash flow fell by $389 million, with the company citing deferred payroll-tax payments, higher inventory purchases and lower Adjusted EBITDA, partly offset by working-capital and pension-related factors.
Outlook, commentary, risks and unusual items
- Management expected fiscal 2022 capital expenditures of $2.0–$2.1 billion and said it expected to achieve its targeted $1.5 billion of productivity savings over three years by the end of fiscal 2022. No specific fiscal 2022 revenue or earnings guidance is provided in the supplied filing text.
- Management stated that operating cash flows and available liquidity should be adequate for the next 12 months and foreseeable future, while cautioning that cash generation and ABL availability cannot be assured.
- The board announced a review of strategic alternatives on February 28, 2022, after fiscal year-end. It included balance-sheet and capital-return options, potential transactions and other strategic initiatives; no decision or timetable had been set.
- Key pressures include inflation in food, fuel and energy; labor shortages, wage increases and union negotiations; supply-chain constraints; pandemic uncertainty; intense competition; and potential disruption from geopolitical events. The company noted that inflation benefited sales and gross margin growth but pressured gross margin rates.
- Approximately 200,000 employees were covered by collective bargaining agreements; agreements covering about 115,000 employees had expired or were scheduled to expire in fiscal 2022. The company estimated its allocable share of multiemployer pension underfunding at $4.9 billion, while stating this estimate is not itself a direct liability for the plans’ total underfunding. It expected fiscal 2022 multiemployer pension contributions of about $550 million.
- Other notable exposures include $8.743 billion of undiscounted operating lease payments, litigation including opioid and pharmacy-related matters, and a California investigation of underground fuel-storage tank compliance that could result in penalties or settlement costs exceeding $1 million. The company said the ultimate outcomes of certain matters cannot be determined.
- Fiscal 2021 included a $106.3 million pre-tax gain related to the Combined Plan/Excess Plan pension arrangement. Fiscal 2020 included a $892.9 million adjusted-earnings exclusion related to pension-plan withdrawal matters. The filing also reports $1.620 billion of GAAP net income, compared with $1.781 billion of adjusted net income for fiscal 2021; non-GAAP measures are supplemental and may not be comparable with other companies’ measures.
Important facts for investors to verify
- Confirm the intended reporting period: this filing covers the full fiscal year ended February 26, 2022, not a standalone “2020 Q4” period.
- Review the drivers and sustainability of identical sales, digital growth, margins and the divergence between GAAP and adjusted earnings.
- Assess cash conversion, planned capital spending, debt maturities, lease commitments and the terms and availability of the ABL facility.
- Monitor labor contract outcomes, wage and supply costs, and progress against the $1.5 billion productivity-savings target.
- Track the strategic-alternatives review, pension-plan developments and material legal or regulatory matters, including the stated uncertainties in potential losses.
- Consider dilution and capital-return constraints: preferred stock pays a 6.75% annual dividend, and preferred conversions increased common shares; common dividends remain subject to board discretion and financing restrictions.