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Albertsons Goes Public as Coronavirus Pandemic Upends Grocery Business – The Wall Street Journal
Supermarket chain Albertsons Cos ACI -2.19% . started trading publicly after years of unsuccessful attempts, buoyed by strong demand for groceries as consumers cook more at home during the coronavirus pandemic.The initial public offering of the nation’s second-largest supermarket chain comes as food retailers are thinking through how to overhaul their businesses to protect workers…
Supermarket chain
Albertsons Cos
. started trading publicly after years of unsuccessful attempts, buoyed by strong demand for groceries as consumers cook more at home during the coronavirus pandemic.
The initial public offering of the nation’s second-largest supermarket chain comes as food retailers are thinking through how to overhaul their businesses to protect workers and customers while meeting higher demand driven by the pandemic. Albertsons, owner of Safeway and Jewel-Osco, is seeking to capitalize on changing shopping behavior by selling more fresh food and higher-quality items from a wider network of suppliers.
“If you’re going to eat at home, you want great produce,” Chief Executive Vivek Sankaran said in an interview Friday. “You want great cuts of meat.”
The grocer is experimenting with ways to bring back salad bars and other services that have been closed because of concern over cleanliness and transmission of the virus in public spaces. Albertsons has been selling prepackaged chicken wings, salads and other cooked items instead.
“We’re in no rush to bring all those back,” said Mr. Sankaran, who joined the Boise, Idaho-based company in 2019 from
PepsiCo Inc.
The shares of Albertsons fell 3.4% on Friday to close at $15.45. The company had targeted a range of $18 to $20 a share for their debut. Mr. Sankaran said market volatility affected pricing this week.
“An IPO is just the starting line,” he said. “It’s not the finish line.”
The pandemic has pushed grocers to adapt their businesses to meet demand and protect workers and shoppers. An employee disinfected a checkout area at a San Diego Albertsons on Monday.
Photo:
Bing Guan/Bloomberg News
The market for IPOs has roared back after a slowdown caused by the pandemic, but Albertsons’s stumble is a notable blip. Most large-company IPOs in June priced at the high end or above expectations, then went on to rise in their debut. Before Friday, U.S.-listed companies that went public in 2020 had climbed an average of 20% on their first day of trading, according to Dealogic.
A few big IPOs are waiting in the wings. Hedge-fund billionaire William Ackman is seeking to raise $3 billion in a blank-check company IPO this summer, while secretive data company Palantir Technologies Inc. is considering a fall IPO, according to people familiar with the matter. Airbnb Inc., which had been expected to go public through a direct listing this year, has been hit hard by the pandemic, and the timing of its IPO has been muddied.
The Wall Street Journal reported earlier this year that Albertsons was preparing what is likely to be among the year’s biggest IPOs—one that allows Cerberus Capital Management LP to start cashing out an investment dating back to 2006.
Albertsons has focused in recent years on centralizing how its divisions buy products and remodeling stores to allot space to faster-growing fresh departments. The chain sold its real estate and leased it back to help pay down debt. The company also added new members to its leadership team, expanded its private-label business and invested in e-commerce.
Since the pandemic took hold in the U.S. in March, Albertsons and other grocers have benefited from higher demand for such staples as meat, pasta and other packaged goods. Same-store sales increased 47% annually in March and grew 21% annually in both April and May, according to regulatory filings.
“The pandemic has helped the volume quite a bit,” said Justin Dye, a former executive at Albertsons and chief executive of cannabis company Medicine Man Technologies Inc., which does business as Schwazze.
More grocery-shopping as a result of the pandemic is fueling growth in an industry that had been contending with fierce competition and thin margins. But grocers are also having to spend more to hire and protect staff, clean stores and keep high-demand items on shelves.
“They’re trying to do everything to make themselves accessible and be a safe place to go,” said Steven Mortensen, founder of consulting firm Edge Capital Advisors and a former executive at the Fresh & Easy chain.
Albertsons, which started as a single store at 16th and State streets in Boise in 1939, explored various M&A options in recent years.
Cerberus bought about 650 Albertsons stores in 2006 and another 900 seven years later. The firm struck a 2015 merger with Safeway to create the second-largest grocery chain, behind
Kroger Co.
After the Safeway merger, the investors tried to take the company public but pulled the offering because of lackluster market conditions for retailers in late 2015.
In 2018, Albertsons struck a deal to go public by acquiring the bulk of drugstore chain
Rite Aid Corp.
in a $24 billion merger. The companies abandoned the transaction later that year in the midst of investor pushback.
Ahead of this week’s IPO, Albertsons arranged a $1.75 billion convertible preferred stock investment from private-equity firm
—Corrie Driebusch contributed to this article.
Write to Jaewon Kang at jaewon.kang@wsj.com
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