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Investments in digital commerce are continuing to pay off at publicly-traded retail and consumer goods companies.
This week, ecommerce growth showed up in a pair of earnings calls to recap the third quarter, as Albertsons and WD-40 both saw outsize gains. Notably, the year-over-year comparisons here are being made with the time in 2021 that ecommerce demand was at its most elevated.
Let’s take a look at the results, and CEO commentary:
Albertsons: Digital and loyalty boost top-line gains
Digital sales at Albertsons increased 33% in the quarter ended Dec. 3, as the grocer boosted its loyalty membership by 16% to 33 million.
These results headlined a quarter in which the Safeway, Vons and Jewel-Osco parent saw identical sales increase 7.9% over the third quarter of 2021.
As with many retailers, the gains in top-line revenue are the result of high inflation, which continues to stick around in the food category. The company saw its gross margin decline 47 basis points, as product, supply chain costs and fewer COVID-19 vaccinations weighed on profits. Albertsons also saw an increase in picking and delivery costs related to the growth in digital sales, but the company is at the same time conducting productivity initiatives to rein in costs.
"Our investments in digital transformation, differentiation in [private label] and Fresh offerings, and the modernization of our operational capabilities contributed to these results,” said CEO Vivek Sankaran, in a statement.
Intriguingly, the combination of growth in digital sales and loyalty memberships is similar to recent results at Kroger. The companies, which are the nation’s top two pure-play grocers, have an agreement in place to merge in a $24.6 billion deal announced in October. However, the deal has yet to close as the companies face regulatory scrutiny. Digital, delivery and data are three of the keys to the merger, as the companies look to pool resources in ecommerce and retail media to compete with Walmart, Amazon and Costco.
Looking ahead to the rest of Albertsons’ fiscal year, Sankaran said that the company believes it is positioned “to continue to drive top-line growth and deepen our customer and community engagement both online and in-store. At the same time, our ongoing productivity engine is expected to continue to support our investments and partially offset anticipated inflationary cost increases, declines in COVID-19 vaccination and at-home test kit revenue, and macro-consumer headwinds."
The company did not host an earnings call with investors as a result of the merger deal with Kroger.
WD-40: Big gains in ecommerce
WD-40, the maker of penetrating oil and other home maintenance products, saw a big boost in ecommerce in the quarter ended Nov. 30. Sales on the online channel were up 51% when compared to the same quarter of 2021. The company said this was driven by triple-digit growth in the U.S. and double-digit growth in Asia Pacific.
WD-40 characterizes ecommerce among the “must-win battles” that will help propel future revenue gains at the brand.
“We're focused on developing a data driven marketing strategy that empowers us to engage directly with end users in meaningful ways online,” CEO Steve Brass told analysts on a conference call. “We expect ecommerce will be the fastest growing retail sales channel globally for the duration of fiscal year 2023. We see a world where almost every transaction in the future will be influenced by a digital touch point somewhere on the path to purchase and we believe we’re well equipped to thrive in that world.”
For the quarter as a whole, WD-40 reported that gross margin ticked up to 51.4%, and increased 400 basis points when compared to the previous quarter. Meanwhile, net sales declined 7% year-over-year to $125 million. WD-40 is continuing to raise prices as a result of inflation in some geographic markets, but also rebuilding profit margins as it halts increases in others such as the US.
Brass said promotional momentum is starting to come “roaring back” in the U.S., while Europe is about a quarter behind that.
“Overall, underlying volumes remain in-line with our expectations and we would expect volume performance to improve sequentially in the second half of fiscal year 2023 as price related disruptions abate,” Brass said.
Trending in Brand News
Campbell Soup Company CEO Mark Clouse offered thoughts on messaging amid inflationary shifts in consumer behavior.
After months of elevated inflation and interest rate hikes that have the potential to cool demand, consumers are showing more signs of shifting behavior.
It’s showing up in retail sales data, but there’s also evidence in the observations of the brands responsible for grocery store staples.
The latest example came this week from Campbell Soup Company. CEO Mark Clouse told analysts that the consumer continues to be “resilient” despite continued price increases on food, but found that “consumers are beginning to feel that pressure” as time goes on.
This shows up in the categories they are buying. Overall, Clouse said Campbell sees a shift toward shelf-stable items, and away from more expensive prepared foods.
There is also change in when they make purchases. People are buying more at the beginning of the month. That’s because they are stretching paychecks as long as possible.
These shifts change how the company is communicating with consumers.
Clouse said the changes in behavior are an opportunity to “focus on value within our messaging without necessarily having to chase pricing all the way down.”
“No question that it's important that we protect affordability and that we make that relevant in the categories that we're in," Clouse said. "But I also think there's a lot of ways to frame value in different ways, right?”
A meal cooked with condensed soup may be cheaper than picking up a frozen item or ordering out. Consumers just need a reminder. Even within Campbell’s own portfolio, the company can elevate brands that have more value now, even if they may not always get the limelight.
The open question is whether the shift in behavior will begin to show up in the results of the companies that have raised prices. Campbell’s overall net sales grew 5% for the quarter ended April 30, while gross profit margins held steady around 30%. But the category-level results were more uneven. U.S. soup sales declined 11%, though the company said that was owed to comparisons with the quarter when supply chains reopened a year ago and expressed confidence that the category is seeing a longer-term resurgence as more people cook at home following the pandemic. Snacks, which includes Goldfish and Pepperidge Farm, were up 12% And while net sales increased overall, the amount of products people are buying is declining. Volumes were down 7%.
These are trends happening across the grocery store. Campbell is continuing to compete. It is leading with iconic brands, and a host of different ways to consume them. It is following that up with innovation that makes the products stand out. Then, it is driving home messaging that shows consumers how to fit the products into their lives, and even their tightening spending plans.
Campbell Soup is more than 150 years old, and has seen plenty of difficult economic environments. It is also a different business today, and will continue to evolve. At the end of the day, continued execution is what’s required.
“If it's good food, people are going to buy it, especially if it's a great value,” Clouse said.