Albertsons Companies, Inc. (ACI) Earnings Call Transcript & Summary

So my name is Dean Rosenblum. I am the new Bernstein Hardlines, Broadlines U.S. Retail Analyst, replacing the illustrious Brandon Fletcher, who is moving on to a next chapter. I am pre-launched. So I won't be tipping my hand to any sort of points of view on individual stocks, but I am very excited to get to talk to Sharon McCollam today from Albertsons. Just a couple of quick -- top quick notes for the conversation today. As much as we'd like to hear about it and get insight to it, I won't be asking Sharon about any of the Q1 business trends. It's just not something that the company speaks to during the quarter. Also, when I use the word brand today, I'm talking about products, not banners. Just for clarity, a lot of retail analysts talk about brands as banners. So banners are banners, brands are products. And I would encourage you to enter questions into the pigeon hole as they occur to you. We're monitoring them and flipping them up to me real time. So feel free to do that. With that, I am very excited to welcome Sharon. When I dropped the tick or ACI, a lot of people don't know what it is. And when I say WMT or TGT or COST, everybody knows exactly what that is. And when I say ACI, they look at me with kind of the this blank stare. And then I say, "Oh, well, let's try it this way." Safeway, Vons, jewel-Osco perhaps, Oh, Albertsons and the light goes on. So Albertsons is, by store count, the #2 pure-play grocer in the U.S. 23-ish 100 stores, 18 banners, the top -- oh, goodness, 4 of which represent something like 80% of your doors. Something like that. It's a company that has a presence in the local market that goes back hundreds of years -- over 100 years from. I'm pretty excited to be talking with you today and covering it. Sharon, you joined in...

September 2021.

Of 2021.

Yes.

So if anybody looked at the stock chart, if you go back to goodness, what was it, it was July of 2021, the stock price jumped from 20% to 29% on the news of your impending arrival -- and then when you did join September 7, the stock bounced up over 30%. So I think that's a testament to your reputation. And I want to talk a little bit today about some of the things that you're seeing that you're excited about what keeps you up nights? Does that make sense?

Yes, that would be great. I might just opine on your comments about the stock price. I joined coming off of to several of the most phenomenal operating quarters that the company has. And so I would love to say that, that is all affects the story, but unfortunately, that would not be the story. The story would be that it was recognition to the company of the performance that they have been delivering throughout COVID. And I got to be part of the next chapter of that, which was very exciting for me. But it was that opportunity, I will say that made Albertson such an interesting choice [ screen ]. As you know, I came out of a semi-retirement, a lot of board service, things like that. And I really believe that I could see the opportunity at Albertsons. It was impressive to see how they manage through COVID, the online capability that was created during that time was unprecedented. They started in that time frame during COVID with virtually no significant online capability, now that you ship out of those stores...

Not alone, by the way. Right? The entire grocery segment was caught largely flat-footed.

Yes. And through the building of that team, which I know we're going to talk about later, it was a fairy tale story of how they brought those banners together and then started executing. So anyway I'll go insight into that July to September, October time frame.

So counterpoint...

Yes.

If you put the stock prices of you and your peers up, your bounce is higher than theirs and strangely coincidental. I'm just saying. So look, I want to start with some really sort of top of mind topic just quickly, inflation. There's 2 sides, right? What are you seeing from the consumer? But my real question is how are you guys managing through cost inflation from your suppliers, from your brand codes to price on shelf? And where are you trying to land in terms of gross margin rates? Are you trying to hold rate and take the penny profit? Are you trying to hold the penny profit, rate will come down? Clearly, you're not eating the cost.

Yes. So we have been very effective, has the industry in total of flowing through the inflation, and it is critical that we are on this every day. Prices are changing frequently, and we anticipate that it will continue for some period of time into 2022.

Sorry, I want to clarify.

Yes.

Are you talking about the percent increase year-on-year?

Yes.

So just to drill on that, are you expecting a continued level of inflation lapping what we've seen at the very beginning of 2022 as we go into '23?

That's top 2 years. As we looked at the 2-year inflation level coming into our Q4 press release, there is something that I think is important for the listeners of this to recognize and it will come up in our discussion. Target, Walmart, Kroger, they all have January approximately year-end and ours is in February, and we were able to have an entire month, the entire -- the prior month post their press releases in order to be able to inform our view on 2022. That happened to all [indiscernible] unfolding of the Ukraine situation, and this is when gas prices started to go up and we got a very clear view of supply chain. That 4 weeks, 5 weeks of supply chain and fuel prices and other insights was very valuable and helpful to this discussion, Dean. At that time, we saw a double-digit 10%, north of 10% inflation on a 2-year basis. And it was our expectation that, that would, on a 2-year, stay in that north of 10% range. Now at this point, we would tell you that we believe there is a scenario under which that doesn't hold in a 2-year of a 10-plus and that you could see something slightly higher than that going into the back half. As far as flowing it through, we are flowing it through, but we are very focused on being competitive. And there are categories, we call them highly sensitive categories where you have to be incredibly price sensitive. As far as your question very simply, are we focused on margin dollars or margin rate? We are focused on effectively flowing through the inflation, which, by definition, unless you flow through -- you only need to flow through 70%. But above and beyond that, it's going to have a rate impact nicely flow it through 100%.

Yes. So full disclosure. Sharon sat on the Board of PetSmart, where I ran strategy, one of my roles was pricing. And we faced this when the tariffs hit in the sort of 2017, '18 range. And we had this balancing act of look, we can't eat the cost, but -- so we ended up trying to hold penny profit, and we saw rate declines and to your point, it was all about the category, right? Some categories that are very price aware and price sensitive and others not so much, and it was all about still maintaining a compelling value.

Yes. And here's the opportunity for us and something that differentiates us. We have been on a major productivity agenda, right? It is part of the DNA of the company. We had $1.5 billion productivity agenda over 3 years, that started 2 years ago. This is the last year of that. And with that is a tremendous tailwind into the gross margin.

And you and Vivek both talk about, look, we're not looking to expand gross margin rate. We're looking to maintain gross margin rate while compelling delivering value. And correct me, if I'm wrong, through these gross margin tailwinds, which are a product of your productivity initiatives?

That's right. So coming into '22, we gave very clear insight into how we saw the year. The productivity agenda is driving tremendous benefit to the gross margin. The offset to that, of course, is the possible impacts that inflation could bring. But more importantly, it is the loss of the benefits from COVID vaccinations. So absent the variants that we've seen in pharmacy around COVID, we would have had a margin expansion this year. But the COVID pressure from last year or the good news we had last year from COVID puts us in a year flattish, slightly lower because there's...

Yes. And I mean for the fourth quarter, you were down 20 basis points on gross margin versus prior year 28.9% for the fourth quarter of 2020, 28.7% this past year, slightly bigger gross margin decline 50 basis points on a full year basis, but it seemed like that was driven...

Coming off of 2020. Awesome.

Yes. Well, what I was going to say is on a full year basis, the decline in bps was slightly greater on a full year basis, which suggests the first half of the year was a more challenging decline owed likely to the fact that there was such a high concentration of vaccinations in early 2020, Q1, Q2?

That's correct.

I want to shift gears to another topic. Again, kind of a quick one. But before we dive this is a strategic decisions conference, I think we'll talk strategy in a minute. But coming out of COVID, so e-grocery was 2.5% of the category pre-COVID. By the third quarter of 2020, it was in the high single digits. By the end of 2020, early 2021, it was low double digits, sort of 11%, 12% depending on whose data you read. Clearly, a massive shift in consumer behavior. On top of that, grocery exploded as calories away from home became calories at home, because, what was it, quarantining and social distancing and pandemic. In the -- in 2021, your online growth rate was -- I'm going to call it flat, on a 2-year stack of like 265%. So 260% last year another 5 points or so this year. What are we seeing in terms of consumer behavior, specifically coming out of COVID, trips, frequency basket and grocery online versus grocery in-store, people returning to store, et cetera? What are we seeing?

Both. We're seeing both. So we absolutely are seeing return to the store and have consistently. The online side of our business, first of all, it is a focus for many grocers. But I think that grocery is going to follow virtually every other category. I remember years ago, people said, you'd never buy any type of furniture online, right? 20 years ago, they said you never buy a couch online. So when you look at what's happened and the way it happened, COVID has accelerated it, right, materially accelerated grocery online, and it's steers that. And then it's sort of -- it's smoothly moving up. Adoption is continuing. And as the grocers get better and better at it then it's going to continue to get that consumer drawn in. Now I would tell you that grocery is a space for people who love cooking that there is an experience in the grocery store. They want to pick it. They want to go through the store. It's unlike a category where I can see it online, I can get a sense of what it is, et cetera. It's very different. And so there is a tremendous percentage of our customers that love that experience. Now on the other side of it, there is also the customer who is now returning to work, who had experienced it during COVID because it was really the safest way in their minds to get groceries and they now are very busy. So drive up and go, we now have 2,000 stores serving the majority of our customer -- 99% of our customers, and that opportunity allows them to do their shopping through the app and then they can pick it up, and we are filling their trunks in 3 minutes. Okay. And our goal is to make it less than that, right? 3 minutes is still 3 minutes of a person's life. Now when you think about the acceleration and why would there be acceleration, and I would say this is a tide that will raise all boats from this standpoint. Why is it engaging for us to encourage multichannel, omnichannel customers? They are the most deeply engaged customers that you have.

So I know that that's true and I'm going to suggest there's a selection bias there as well, right? Because you're taking the population for whom shopping with you is the best answer for them and they're engaging with you in ways that are more convenient depending on the moment for them, right? So it is true that you're -- I don't want to -- I guess what I'm saying is I'm not sure I would conclude that engaging multichannel is causal. I think it might be more a result.

We can debate that. I believe that the more opportunity you have to serve a customer in the way that they want to be served as conveniently as possible, it makes them a better customer. So they want to do business with brands that can serve them in whatever method the customer chooses and -- but you have to do them both extremely well. The key is it doesn't work, and I would agree with you. If you're not good at the other side of it, if you're not an omnichannel player and you are not good in the online space and it's not a great experience. I couldn't agree more, Dean. But when you get it right, I think it is magical. And then I want to talk about the app because...

So before you talk about the app because we're going to get to that. We're going to talk to think about that time permitting. We will talk about the app.

Yes. But it's the only way to get into something...

But I just want to see if I could get a crisp understanding. So are you -- so let's presume just for fun that digital as a percent of grocery is now at 11, and that's the new watermark. Are you anticipating that, that penetration of digital as a percent of total grocery will continue to grow from here?

I believe that.

Okay. Cool. Thank you because that's obviously one thing we're going to watch for a host of reasons. Okay. So I would like to dive into strategy. So you and Vivek have articulated 4 strategic pillars. I'm going to take a shot at this, correct me if I'm wrong. Driving in-store excellence, accelerating digital for a host of reasons, perpetual productivity and talent, culture and communities. Those are sort of the 4 big pillars. Each of those has a series of priorities within them, right. So I want to -- I'm going to go through these, just dive in on a couple of topics, if I may. So on productivity, the -- we talked about this just a moment ago. Are you thinking about productivity as being a gross margin tailwind predominantly? Or are you thinking about the productivity as flowing through to operating profit? Two-part question, right? One is if it's a gross margin tailwind, I presume it's in logistics supply chain, et cetera, as opposed to stuff that might be below the gross margin line.

Yes. So I would say, again, it's both. When you look at the history of productivity the last couple of years, you would've seen both. You have seen significant investment in the digital capabilities, in the supply chain, in all the areas that you talked about in the stores, but it's also -- a portion of that has flowed through to the bottom line, as you can see from the expansion of the adjusted EBITDA margin. So moving forward...

Sorry, just to clarify, pre-COVID, your operating margin was in the high 1s? In the last 2 years, you've put up north of 3% adjusted operating or -- that's maybe GAAP, but pretty significant step change in operating profit?

Absolutely. So -- and part of that's volume, part of that's productivity, of course. But when you think about the flow through and the investment, the biggest portion of this next phase of productivity will be invested in the business, and we've been clear about that and offsetting significant inflationary headwinds. I can tell you that if we were sitting here today without a $500 million from this year and $750 million we've already announced on the next phase of our productivity, we have seen inflationary increases across the entire P&L, and we can start with labor. I don't think I need to tell anyone on this call or in this room that labor increases have reached record levels from a frontline and distribution...

So are you seeing labor increases commensurate with the market? I mean as a union shop, I would have presumed that at least some of that would have been baked into the contracts, both in terms of higher starting and also baked in constraints on market pressures on raises.

Yes. I would say that, that perception and the distance between being in the union and not being in the union needs to be held by the unions, right? Otherwise, you could argue, why being in union.

Yes, they're pushing up against to keep to maintain the gap between...

So, Dean, I think you can think very much in terms of market rate increases in the unions.

Okay. So some of that productivity is above the line and flowing to COGS, others of it is below the line and...

And it's not just in COGS, it's also coming through on the SG&A side.

Yes, that's exactly what's going. So some of it is flowing through in the SG&A line and some of it will flow through the operating profit. Much of it is being reinvested.

Yes.

Thank you. Fresh. So when you look at your fresh mix as a percent -- not a percent of sales because it's a ridiculous stat, right? When you include fuel and general merchants and stuff. But if you just look at perishable and so grocery, fresh versus nonperishable. So explicitly, nonperishable includes things like dairy, frozen, et cetera. Fresh is like produce, meat, deli, bakery, pretty hard straight up fresh. Your mix is substantially higher than your #1 peer. And I'm going to assert that you might actually expect that to increase as you bring online your prepared meals capability.

We -- it is a top priority for us to continue to serve our customers through Fresh. We believe it is one of the biggest value adds that you can add to a consumer, and it is important to their lives. So from our perspective, penetration in Fresh is a top priority. You looked at customers for life, and we read our last transcript. It's part of that agenda is to make sure that you can't go anywhere else and find pressure. Now that is a journey. You don't start and wake up one day and say that's my objective. There's investments that we are making in that space.

So I just want to clarify a question. When you say penetration, you're talking percent of sales?

Yes.

Okay. A lot of times, I've heard penetration be sort of household penetration or basket penetration. You're talking straight up percent of sales. I think it was a...

Yes, it is. It would be all of the above.

So clearly, the metric, though, I think you're talking about is percent of sales?

Yes, that's exactly right. We believe that, that ends up coming from the basket and from where the customer shops in our stores.

Clearly. So just to clarify, you said low 25% right now, 1% fresh as of the year-end 2021, yes, with an eye towards 30%?

30% is our own brands.

Own brands. My apologies.

No problem.

I take that back.

Just to make sure that everybody is with us, what he's referring to there is our private label business, which we said at the end of the year was in the 25.6% range. When we did the IPO and we reiterated in the fourth quarter that our goal there is to get to approximately 30% and a portion of that is in the area that Dean is referring to, that's why you're making the relationship between them is in our prepared meals and other items that are flowing through in the fresh side of our business. It is an area where the customer really looks to us for that, and we think that that's a tremendous opportunity for us because quite frankly, it is the strength of this business. The various banners have had a strength in this area, and it is opportunistic to invest in that space because we're starting with a very good baseline with our customers.

One of the things I thought -- just to aside, one of the things I thought was interesting is Vivek had talked about the idea of defining -- my words, not his, defining the sandbox, right? We could either see ourselves as participating in the grocery business, which is, whatever, $800 billion. Or we could see us participating in the food business, which is $1.6 trillion. We choose the latter, which is ambitious, but I think there's something to be said for dreaming big?

Exactly. I think that it's somewhere in the middle of that. There will be areas that, of course, we don't try. But you have to look at that because, quite frankly, the consumer behavior has changed. Food away from home and food at home, the mix of that, and people's lives have completely changed.

We talked about this all the time as a consumer

Yes. I mean, there's no question about it. For the grocery space and for the food space, the customers are no longer returning to work 5 days a week.

And that's...

They are eating substantially more meals at home. Now during COVID, we would talk about this and people would say do you believe that it's going to go back to the way that it was pre-COVID? And so in 2020, people believe that, that was possible. 2021, people said well I think it could go back substantially, but it sounds like everyone's going back to the office, at least probably 4 or 5 days a week, and that was pretty much the sentiment during the very back half of 2021. And now I don't need to tell you guys the companies that have decided to implement much greater flexibility for their team members is substantial. And you've got companies that are really only having people come in every other week for presence for purpose is a common term or some version of presence for purpose. But that is important because, Dean, to your point about fresh, then that brings in an entire menu and an entire life because now this is permanent for me, what do I want to include, I want it to be healthy. People are very focused on health. They're still -- we're all still working on our COVID pounds and I think that this is an area that is right for substantial expansion with customers. And I do think it affects the food away from home category.

I do, too. And look, there's a difference between the hot side of the daily counter with the rotisserie chicken and the fried chicken and the chicken tenders and a couple of sides versus a dedicated place in the store for thoughtfully prepared meals that I can literally grab and go.

Absolutely. And I know you've seen that in our...

So that's actually where it's going. So remodels -- so you've done a bunch of remodels, a couple of hundred in 2021.

Yes. I think you can just think about us having remodeled approximately 10% of our store fleet every year. That's sort of been the metric. Since the Safeway acquisition, we're at about 70% of our stores. And each one is different. Each store needs something different. We're a large collection of banners, as you know. So -- but that is maintaining our stores and keeping them fresh for our customers and creating, remember, part of customers for life and underlying in-store excellence is making sure that there is an environment, that is inspiring for customers. And so today, it is a top priority. And what are we doing in the stores?

So that was -- I was literally going to answer. If I walked into this, so I have an Albertsons and several Safeways pretty close to me. I live in the Phoenix metro area. So if I walked into a Safeway that had been remodeled that I was familiar with, what would I see that's different? That's new that will make me go, oh, look at them.

So first of all, the stores are lighter, they're brighter. And from an environmental point of view, they are better for our planet. So wherever we're doing this, we are very focused on the ESG agenda, which is no surprise. We all need to be focused on that. As you think about the areas of the store, you're seeing new types of refrigeration in the store, much more visually inspiring, also very temperate freshness is so important to the customer. Doors on some of the refrigeration, but ones that you can actually visualize the product, but that keeps the temperature at a level that is moderated and this is very important. You guys -- if you actually leave milk out or fruit out or other products for even an 1 hour to 2 hours, you're taking off the shelf life.

Yes, 1 hour is 1 day.

So with that, we have been very focused. And of course, this plays into a very important aspect of the margin discussion that we had a little bit earlier as part of productivity, which is shrink. So the investment is driving a lot of different things. You're going to see ready meals expanded in our stores.

I was so hoping you would say that. What does that look like?

Yes. So what ready meals looks like is you've got your delis, and those delis now, where we're doing investment in those is there's a lot more automation in the delis [ packers ] and sizes and things. But then right in front of the deli because you're going there for something prepared logical for the customer usually to the right. There is going to be an entire section of a variety of meals. And depending on the store -- remember, food is very regional. It's very local. So different stores have different things, but take a Tom Thumb in Texas, as an example, you're going to see an ethnic assortment. You're going to see some Chinese food. You're going to see some Italian food. You're going to see various types of alternatives, ready-to-eat, ready-to-heat different salads, of course, packaged and focusing on things like the packaging, not spilling in the car, all the things that if you have something in it, every detail is being obsessed over as it relates to how convenient is this [ throwing ] it in the microwave, et cetera. So meals is a huge category for all of us, by the way, it's not limited to Albertsons and don't think the competition isn't thinking the same thing we're thinking. But we believe that our platform bodes well for us. The other thing about freshness that may not be well understood and a differentiation for us is that in most of our stores, we still have a butcher, and we are cutting meat every day. We also, adding to that, are cutting fruit in our stores. Guacamole is made in our store that day...

Which gives you a chance to have fresher product and you use the avocados that are right before you throw about.

And that is, to your point, but more importantly, Dean, that means something to our customers.

No, I completely. It's such a -- it's a virtuous approach.

Exactly.

It's not easy. It's not a short put though, right because now you're taking, you have hourly employees on the floor, now you have to motivate hourly employees to put out a quality product every day and to have processes in place to make sure that they know how to do that and that they're doing it that way and then it's flowing through the customer.

Yes. But Dean, I would tell you about the team members in the stores, they are so proud of that. There is a pride that comes in that. Take the cake decorating activities that we do, they actually invite the cake decorator often to the birthday party. They are so pleased. They are really part of the community. They're doing the graduation. They're doing these things. In the fresh side, on the fruit side, the people are in the store generally when the customers come in and they talk about, oh, do you have any more of that, that's so fresh, makes people very proud. And Dean, right now, people want a reason and a meaning in their work. And these -- we want it. These individuals are no different, and I can tell you that over the years, the brands that have come together to be Albertsons, the employees are very proud to work there. I walked into a store and have an employee that's been there for 55 years still telling me how proud they are to work for those brands. So I think this adds to employee experience as well as customer experience.

Great. Okay, lightning round. I want to take a couple from the audience. Can you talk a little bit to your efforts at reducing food waste?

They're constant. We've implemented several technologies to help us plan for -- especially in the fresh area. We implemented an all fresh. We just are starting. We're early in that, helping us do both forecasting of needs and then management on the floor of [ best ] use by dates. But this initiative is being even more amplified by our ESG initiatives, which we just launched on Earth Day this year, put out a whole report around our ESG initiatives. But the solution around that, around food waste is going to be to continue to improve your forecasting on what you need where you've got a shelf life that is going to cause an exploration. Now I will tell you that the -- it's important, let me talk about the food waste. It's not waste. It's food that is near exploration, let's call it that.

So I was actually going to just check it. I think the question is, are we making sure stuff gets used and goes where it can be used?

Yes. that's an audience question.

I know. I just wanted to make sure we get to that.

So let me talk about that. When we are at that point, we are donating hundreds of thousands and millions to the local food banks, and they depend on us to do that in the communities we serve. We are a big part of that community. And by the way, our employees are also very, very proud of that. So -- but that would be the usage [ giving our ] food on the other side, where you do end up with the possibility of curing to the extent possible, that would be a shrink for us, of course, but that is going to homeless and food banks and people who are in need.

Okay. Another question from the audience, complete non-sequitur, full disclosure. You joined Best Buy where I think the -- in hindsight, certainly, the consensus was sort of a lot of low-hanging food. And you come through -- you came through that process, obviously, 2 great results, and now you've come into Albertsons coming up on a year. Can you discuss how those experiences were similar or different in terms of low-hanging food versus less low-hanging, higher reaching, I guess?

Sure. So when I came into Best Buy -- let's just talk about the backdrop of joining, Best Buy was in serious trouble. And virtually, some might say they've not gotten through that fourth quarter, possibly on the verge of bankruptcy. And that was not the situation at Albertsons. So let's just talk about the direness of the situation. They don't look anything the same. So we've got to start there. The other thing at Best Buy was productivity was not in their DNA, right? And Vivek is really attribute so much of this to Vivek and his leadership. They came in, and it is part of the DNA of this company. They know that forever, you need productivity tailwinds to invest and to offset the inflation that will come in this industry. So they were along that path. However, they were early in that, right? They were a $1.5 billion program had been announced and about half of that $0.75 billion, almost 1/2 or 2/3 of it was starting to be delivered at that point. And the big magic in that was winning model. And that is the -- and what winning model is, Dean, for those of you that haven't read a lot of our press releases is Albertsons prior to 2021 was buying at the division level. They have not consolidated purchasing as a total company. So your largest division was your largest scale. This was -- this is like open heart surgery.

Sorry, is it division a banner, in your role?

A banner, yes.

Okay. Got it. So Safeway would have been big. Albertsons would have been big and then it gets smaller.

Yes. We have 12 divisions. So there could be 2 banners in the division. And with that, this has brought enormous benefit. But let me tell you the other benefits that it brought. We have always operated as divisions. There's 12 of those. We have more banners and divisions, small divisions [get frequent ] large divisions. And we had advisers come in and really work on how do you do this? How do you keep the divisions energized, keep them motivated, keep local? So the theme under this was nationally great and locally strong or locally strong and nationally -- locally great, nationally strong. It really held goes. And the opportunity we're early in that. Dean, we just really got going, and we're doing it by wave. When I say this is hard, guys. I'm not kidding. This is huge in a grocery retailer with the number of SKUs and the number of vendors. So -- but what it's also done Dean, is give the division's confidence that you can go nationally strong and a lot of other things, right, because their businesses has not been negatively impacted by the implementation of such a strategic opportunity. So I think over time, to that point, that is a tailwind for us. And it's a tailwind that is in its infancy at this point in time as it relates to everything besides the winning model. So I think that going forward, when you're trying to compare it to Best Buy, there is tremendous opportunity. I joined because I believed in the work that they had done -- and let's talk about the most unprecedented number that I believe that they delivered. And I, of course, knew when I joined, that the number was growing materially. Over on loyalty, we've talked about...

Over 30 million now.

The fact [ tipping ] to loyalty, but we started in 2019 with 21 million loyalty members, and we ended the year at 30. That is a 45% increase on a scale base. Some people would say there's outcomes out there that can do 200%. We're talking about 20 million days and growing that over a 2-year period of time. I could not think Dean of a better platform for growth than that. And I mean you guys just [ tiresome ] to give us their personal data. People would rather have root canal surgery, they can't give you their phone number right? their cellphone. So I really believe that this is a substantial difference. Now that was not the case when I joined Best Buy. When I joined Best Buy, we were in a decline on consumers, and Amazon was, of course, aggressively going after the company and with winning. So it's a very -- however, don't count out. We live in a complete state of paranoia, the Amazon, don't worry. We are all very focused on the formidable competitors that will come out of the online space, but it's a different backdrop thing.

Cool. Thank you. So we have about 8 minutes left. I want to get through just a couple of super quick, if we can. So one other question from the audience. You talked about the private label, and I just want to clarify. There's a difference in my mind. There's a big difference between private label and own brand. Those are different things in my mind. So the question is, what's the strategy, if any, for private label, I'm going to call it, own brands. Private label...

Yes. We call it owned brands internally.

Yes. No. So specifically in pharma and consumer health products?

Owned brands in pharma and consumer health products, that has not been a primary focus for us. And I think we have such substantial opportunity in the other categories. But in the prioritization and the capabilities that we have, I think that, that would be an area that would not be one that I think would be the most material for us.

So I'm going to editorialize this for a second. When I did strategy for all the years that I did at Pepsi and Aramark and PetSmart, I had a slide that I made that was framed that I pointed to a lot, and it said, "We can do anything. We just can't do everything." So I'd like the fact that you were able to say, look, it's a thing, but it's not the thing. It's not part of our focus. So I appreciate that. Okay I want to just touch base on digital quickly. From my conversations with Melissa and Cody, my understanding is percent of sales, digital or e-commerce or e-grocery is mid-single digits percent of sales right now?

Good estimate.

Okay. The order origination for me is a very interesting thread, I don't know if you can speak to it again briefly. Any sense of what the mix is of first-party origination versus third party? Forget app versus website, et cetera. But when orders come in to you, how many are coming in through your portals versus, let's say, the Instacart ballpart?

So we have not disclosed that, and so I won't be disclosing it here. But let me just talk about the possibilities for our customers because we think strategically, we made the right decision. Today, if you want to engage with Albertsons from a digital perspective, if you're a store customer, you download our app, you place the -- and we just launched this new consolidated that we have several apps. We now have a unified mobile app, taken into pharmacy...

UMA?

Yes. UMA, pharmacy and food. So you can engage with us like that. If you are a DoorDash customer, and many of -- many people have DoorDash subscriptions, I might add, you can also place an order through DoorDash, also through Instacart. So Uber Eats. There are various ways of you to engage with our business, and this gets into a strategic decision that we made Dean. It has to be how you want to engage. Now our goal, when we see these digital engagements, is we have our own subscription, which we just -- we are in the earliest days of Fresh pass. And we would love to convince these customers that, that would be the ideal way for you to engage with us. And over time, we're seeing that moving, but we are perfecting it. The thing that you don't do is roll out some -- a service like that. Remember, we just finished getting our drug stores rolled out. That's drive up and go -- pick up in store, drive online, pickup in store.

Dedicated entrance, dedicated parking spots, dedicated people. Text when you arrive..

And 3 minutes to the trunk. You just to place your order, you let us know. We actually are tracking you, and then when you arrive, you present...

Tracking in a good way.

In a good way, yes. And then we're there for you. Okay. But we just built that capability. So, Dean, on the delivery side, we don't -- we are very thoughtful about the NPS scores, and we will maintain that. But as we get better and better and better at it, that's when you market, you don't start making major marketing splashes around things, but you're not fully perfect at that.

Net Promoter. Okay. So let me just explain why that's an important question to me as an analyst, right? And I've shared this with Cody and Melissa. So as I think about order origination for me, if your order origination, and I know you're not discussing this, but if we're at 90% first party, that's sort of one big stream versus 20% first party. It says 2 very different things about your customers' orientation, not just to your store, but to what they believe to be true about your mobile capability. I'll tell you exclusively...

More they don't know that you have mobile capabilities, right?

Well, yes, so that's where it's going, right? So Sprouts, as an example, we shop at Sprouts regularly because they don't have a mobile capability. If we need fresh Cilantro and organic sour cream from Sprouts, that's going to be an Instacart not that we use it a lot, but that's the only game if you want to order from Sprouts. So that's something that I think we'll be asking about over time. Likewise, the percent of sales from digital like as we -- as that matures for you, certainly, that's something we'll be asking about on a pretty regular basis. So we have 2 minutes left. I'm going to ask a pretty open-ended question here. Of all your strategic priorities, which one do you think matters a lot about which you have the least certainty?

I would say that I don't have a strategic priority that I have the least certainty. When you narrow down to 4 strategic priorities, I will say that anyone that you talk to that has 10, it's 2 [indiscernible]. So the wonderful platform that has been built prior to my joining around staying focused on the path of the strategic pillars, it governs virtually everything we do, Dean. And there are clearly different people, different resources and different levels of sophistication within the organization on enhancing and accelerating digital engagement. I think in loyalty, bringing customers to life, et cetera. I think I've given you some statistics that say we've been extremely effective at that. Driving productivity, I think we -- you guys have seen the numbers. We talked about it $1.5 billion over 3 years and now another $750 million on the table. So that has been very successful for the organization. Then there is, of course, in-store excellence. I think we can still -- we're investing. We're making progress. It's the biggest lift that you have. We're dealing with hundreds of thousands of individuals to make that work.

270,000.

So yes. So with that, that would be the hardest, right, from an execution point of view.

And still you feel good about it.

I feel wonderful about it. I feel that we need to give them the tools. We can talk about pain points for a minute because I would say that this is something that we did share with Best Buy. Going to work in a grocery store, in a deli in the various areas, there are immense numbers of pain points, Dean. And over the years, they grow and the people find ways to work around them. And technology and other capabilities can solve so much of that. That is -- and we even mentioned in the fourth quarter conference call that addressing those pain points was a top priority for us.

It's good for the employer. It's good for customer.

And it is a -- and by the way, I would call that a crusade.

Let me tie it back to something you said earlier, the take-home meals that President and CFO, and I'm going to argue Chief Transformation Officer, maybe is talking about having the right containers so that the take-home meals don't spill in the car. That's a level of attention to detail you don't hear every day.

That's fair enough.

So we are about -- it's counting up now. So we're out of time. I want to give you one last question, if I may, because I know we talked about it. You talked in your Q4 release about a project that you're running in concert with the Board to look at strategic alternatives for a whole host of balance sheet things predominantly, if I recall, I know that's on the mind of investors. Anything -- any updates there? Anything you want to talk about there?

Yes. So I don't have an update, obviously, here today. But what I can say is that we have consistently said, what would the process look like. We were open to all strategic alternatives. To your point about the share price, I think that's interesting. But from an operational point of view and the success the company has had, we felt that the company was undervalued and versus our core peers. And with that, we said, you know what, we owe it to our shareholders with this kind of underlying performance and opportunity in front of us to look at and be sure that we're doing everything we need to do in order to create the value that we believe is absolutely there. So that was the foundation for the announcement. We are looking, of course, at our real estate. We have a tremendously valuable real estate portfolio, pre-IPO. In 2019, it was valued at about $11 billion. In order to do an appraisal of that real estate, I'm not going to bore everybody in this room, it is a very intense process. There's a certain type of appraisal that has to be done called the [ Fannie Mae ] appraisal. It takes a fair amount of time with as many properties as we own. So we're looking at what is the value, even of what the assets we have and since so much of its West Coast based and has had, we expect appreciation. So beyond that, we will continue to look at all opportunities and have discussions as we would expect us to be having at this point. My guess is that we're still a period away, and we're not in a hurry, by the way. The world is changing around us as we think about these things, but the foundation of our business is strong. And we believe that, that is the primary focus is focusing on execution in this business, secondary with these key things that [ we need to look after ].

So stay tuned.

Stay tuned.

Ladies and gentlemen, I would like to, first of all, thank Melissa Plaisance and Cody Perdue who spent time with me helping prepare for this. And obviously, I'd like you to help me thank Sharon for joining us today. I enjoyed our conversation immensely. I look forward to continuing the conversation.

Well, Dean, we thank you and appreciate you investing the time for the Bernstein. We have so much enjoyed getting to know you and look forward to your coverage. So great. Thank you.