Why go public amid a raging pandemic? Albertsons CEO explains

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Grocery giant Albertsons had big plans to go public in 2015, in what would have marked one of the year’s biggest IPOs. But the grocery giant backed out of its plans, put off by a turbulent retail sector.

Today, as Albertsons and its competitors navigate a global pandemic, the 2015 retail landscape looks tame by comparison. “We are operating in industry that is transforming so rapidly,” says CEO Vivek Sankaran, who joined the company in April 2019 from PepsiCo.

But this time around, the uncertainty and tumult didn’t stop Albertsons from debuting on Friday on the New York Stock Exchange under the ticker ACI. The IPO ended up being relatively disappointing for the retailer: The company priced its shares at $16, below the $18 to $20 range it had previously been seeking. (The company’s shares closed at $15.45, down nearly 3.5%.) The second-largest grocery chain in the U.S. behind Kroger is backed by private equity firm Cerberus, which invested in 2006 and has been looking to exit.

In the last few months, Sankaran has overseen an explosion of the company’s online business as consumers radically change the way they shop. In April, for example, the company reported that its e-commerce sales that month were up 374% over the previous year.

Fortune spoke with Sankaran about Albertson’s IPO and how COVID-19 has impacted the company, which runs more than 2,000 stores under its eponymous brand as well as the likes of Vons, Jewel-Osco, Acme, and Safeway. The following conversation has been edited for length and clarity:

Fortune: The company initially announced its intention to go public in 2015. Why the delay, and why move forward now? 

Sankaran: It didn’t work out in 2015. At that time, we brought Albertsons and Safeway together, so the company has spent the last several years getting that integration right, and modernizing the company—putting technology in every aspect of it. There’s been a lot of work to strengthen the company and to get everything right from the governance aspects so we’re ready to be a public company. We felt we were ready from a business and performance standpoint. And surprisingly after a few turbulent weeks, the markets seem to be ready.

You ended up pricing below your target range. What happened?

It’s so difficult to predict what’s happening in the stock market. There’s so much volatility. Some of our investors have been with us for 15 years, so we’ve got to monetize some of that. And we are long-term oriented. We want investors to stay with us for that kind of duration to create value.

How has COVID-19 changed your strategy? 

COVID has accelerated our strategy. We pride ourselves on our fresh assortment—our meat and seafood, all of the prepared foods we have behind the counter, the depth and variety of what we provide in our stores. That was always the case. When you’re cooking at home that becomes even more important. You open your refrigerator five days after you went to the grocery store, you want that cucumber to be firm and that’s the advantage we have. Our e-commerce business is growing rapidly. We have so much more headroom there.

What is the role of the physical store going forward? 

Your question may come from this notion that everyone is going to buy online, and you may not need a store. I don’t think that’s a reality. It’s not a reality in countries where online has been around for a long time that have even higher density than America.

Also, recognize that a store, at the end of the day, is just another point of inventory. There’s service, there’s ambiance. But it’s also good inventory close to your home for us to bring it to you, or for you to pick it up. So we’re using our stores as a nice foundation for the omnichannel business.

What have been the hurdles with e-commerce?

It’s in the early stages of its evolution—not only for us, but for the industry as a whole. We’re all trying to learn how to meet customer expectations, frankly how to change customers’ expectations. It’s such a dynamic environment, and I think that’s what you have to accept if you want to be in the e-commerce business. You’re always piloting, always trying new things and investing behind it. It’s a big part of our growth agenda. The piece that’s been the most gratifying and somewhat surprising is the amount of new business when you open up e-commerce. 

How have customers been shopping differently? What do you view as permanent and what’s just a blip? 

Nothing is ever permanent. That’s a dangerous mindset to get into. They’re all coming to the stores less often but buying more when they come to the store. There are two things driving that one. One is safety, or the perception of safety. And the second, is they’re cooking more at home. They’re buying a lot more fresh, baking more at home. More cookies at home, they’re drinking more at home.

People, I think, are enjoying the time they have at home with families. I think some of that will stick. People are rediscovering that, by the way, we can get a lot of work done without having to commute two ways and spend those hours. As these things stick, at-home consumption sticks. It’s hard for me to imagine that all of this just goes away and people jump back to restaurants and their old way of life in an instant.

Are people stocking up to the same extent? Do you view that as an indicator of where we are in terms of a recovery? 

People stocking up was more in the months of March and April. We’re starting to see a lot more steadiness. People are engaging more in produce and fresh products, and the supply chains have come along nicely to support that.

What’s been the biggest challenge in making sure your employees are safe? 

It’s my No. 1 priority. I spend time on that every day, on keeping our associates and customers safe, and being there for our communities. We are always learning and innovating on how to keep people most safe.

In the early days, we couldn’t get sanitizer. One of our colleagues ended up getting sanitizer in bulk drums and we converted one of our beverage plants to get it into bottles to get it to our stores. Now those things are stabilized. It’s not so much a supply problem. At this point, my message to people is: You start thinking you can relax, but you simply cannot relax when it comes to COVID. 

Where are we in terms of recovery? 

It’s really unfortunate to see cases spiking up again in this country. I don’t think we’re anywhere at a place where we can declare victory or let alone seeing a path to victory over the virus. That’s how I see it.

More must-read retail coverage from Fortune:

  • Stitch Fix’s new growth strategy: Letting non-clients shop directly, too
  • E-book reading is booming during the coronavirus pandemic
  • Why Lands’ End is betting on its new Kohl’s partnership to refuel growth
  • How Chipotle’s past food crises prepared it for the COVID-19 outbreak
  • The soda market is popping with new contenders. Will they stay or fizzle out?



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