Hi, everyone. I'm Beth Reed, retail analyst at RBC Capital Markets. We're pleased to have with us today, Vivek Sankaran, the CEO of Albertsons. Albertsons is coming up on the anniversary of its IPO last summer and has navigated a challenging year quite well. Vivek, thank you for being here, first of all. Before we jump into the Q&A portion, I'd like to turn it over to you for some opening comments. Hey, thank you, Beth. Great to see everybody. I just wanted to say a few words about where we are and where the business is so that you have that as context. Our strategy, which is really based around growth, which is continuing to drive in-store excellence around our fresh portfolio, our own brand portfolio, e-commerce, and the growth of our loyalty program. The growth piece of it, second, around productivity, which we've delivered half a billion last year, and we raised our target going to 2022 from $1 billion to $1.5 billion. We continue to find productivity to fund that growth. We put a lot of energy in creating a foundation of technology in the company, not only for the back-end infrastructure and everything that associates work with to enable core capabilities, but also a lot of investment towards customer-facing technologies, especially when it comes to e-commerce and all the digital engagement we do. We've worked hard to build a culture. I mean, behind me, you see a screen that says, "Jewel-Osco an Albertsons," where we're able to be really nimble, where we need to be locally, like in Chicago. At the same time, leverage the scale that we have as Albertsons and a culture that's entrepreneurial, which served us really well during the pandemic. We feel good about those four pillars of our strategy. It's working for us. Our performance continues, as I measured it, on top-line growth, market share growth, and the flow-through to the bottom line. We are in the early innings of a transformation, so we have a lot more headroom. I'll pause there, Beth, and I'll turn it over to you. All right. Great. Thanks for that context. I guess I want to kick it off by asking about demand trends at a high level. We saw an initial stop-counting phase in 1Q 2020 as the whole pandemic hit. After that, identical sales growth was very solid in low double-digit territory over the balance of the year. You saw consistency across geographic regions, even as certain areas started to reopen. Now I guess with the widespread vaccine, restaurants largely open, mobility getting better, how do you think about the duration of consumer demand for food at home in the post-COVID world? Beth, my observation would be that we had predicted that some of the new habits that consumers have adopted, which is eating more at home, elevating the quality of what they're eating, so the trading up behavior that we saw, we projected that would last, and that's what we're seeing. We're seeing some of those behaviors sticking. We had planned that the sales would certainly come down from the last year from a dollar standpoint. It's turning out to be just like we expected. We had planned that it would be more reflective of the latter part of last year in this first half of this year, and that's how it's playing out. I can't say for sure how it'll change as we go into the second half of the year. The broad message here would be that some of the demand that was created as part of that pandemic seems to be sticking. Okay, great. During the depths of the pandemic, as consumers consolidated trips, it's easy to see how you would benefit given the full-service model approach to grocery. With that said, do you think you're at any sort of disadvantage versus mass merchants with maybe more product categories beyond food and household essentials? Along with that, are you still seeing trip consolidation as mobility improves? Beth, I think the trade-off you're going to see this time around, because of what's changed in the pandemic with people cooking at home and eating more at home and enjoying cooking at home, I think you're going to see that while we may not have the breadth of the portfolio in non-food as a larger box might have, we still have great presence and breadth in fresh. We've found throughout the pandemic, consumers are coming to us more often for the fresh shopping location and less often to finish the full basket with us. Right? We expect that some of that full basket may get more dispersed, but we continue to see strength in fresh. I think that's going to be different coming out of this pandemic, relative to what might have been before the pandemic in terms of shopping behavior. We've seen consolidation. What's interesting is that we've seen while we've lost some trips, we've actually gained trips of those who were our occasional users, right? People who had consolidated elsewhere are starting to come to us now, which is a good sign. Those users give us an opportunity to elevate them in our loyalty program. Okay, great. Maybe shifting gears a bit. There's some question or concern out there around the promotional landscape and what's going to happen as the industry begins to anniversary challenging comparisons and some food dollars shift back to restaurants and bars. With that said, I guess, how do you think about the industry's overall promotional environment now and as we move through 2021? What's different, Beth, this time from prior, let's say, recessionary times or where we might have seen a contraction in volume, I think there are two or three things that are different. Number one is that the consumer is doing well. Right. There's a lot of cash sitting in their banking accounts, and so demand not only for food but for everything else is high. Second, supplies are shorter. Right. We still have shortages in several categories, and you can see things happening that drive these shortages. When there's that supply-demand imbalance, it's hard to promote and win on price because elasticities don't work. We're seeing a pretty. The environment is like it was a few months ago. We're not seeing any behavior that leads us to believe that it's going to become more promotional. The other things I'll tell you is that there's a lot of work that people have done, we have done, certainly, to embed technology in promotions. We're focusing on quality, not quantity of promotions. That's a big difference because you get into these industry challenges when people throw a lot of things out there. I think a lot of us are using technology to be focused on quality. Finally, we're all going digital, right? You'll see a promotion on your phone that somebody else won't see, because we know it matters to you. I think there's a lot more discipline in promotions, just enabled by technology in the context of the market. Got it. Then, I guess another big topic for grocery, or in particular, is inflation. You mentioned in April you were seeing 3%-4% inflation, I think planning for 1%-2% in the P&L this year. I guess, can you just tell us how you think about the scenarios in which inflation could play out over the course of 2021? Then you've spoken to your ability to successfully manage 3%-4%, but what happens if it goes beyond that level? Yeah. Beth, I really can't predict what's going to happen with inflation through the year. There's a school of thought that this is transitory, i.e., we're going to see some spikes now and as supply comes back, it'll come back down. For us, if we are in that 3% to 4%, 5% range, especially with the consumer context that I gave you earlier, I think we feel very comfortable. I think companies like us do well with that kind of inflation, and historically, it's been that case. If the inflation gets higher than that, this will be an odd scenario where the inflation has gone higher than that. Let's say it's 7, 8%-ish. It's an odd scenario in that it's going higher when there is a lot of demand and when the consumer is well off. Not sure exactly how that will play out, but let's take the downside case. If it goes out that high and we are not able to pass all of that through, we have, I mentioned the productivity program going up. We have all of these productivity dollars that are going to come through, especially during the second half of this year and beyond, that we will continue to make sure we use to deliver the commitments we've made, right? In that scenario, it'll be just the right smart use of dollars. Okay. How do you approach the decision of whether or not to pass through certain costs? In this environment, is it different what you've seen in the past in terms of being able to pass along price increases? We haven't had issues. We haven't seen issues yet. The first thing we do, we just have a program. One of the reasons we're able to get this increase in productivity is we're changing the way we buy in our company, especially the cost of goods, all of the products that we buy. In doing that, you offset some of the cost increases through all of the practices that you do in buying. We'll put a high bar on what cost increases we take. When we take it, depending on the amount of inflation, we pass it through because I think, to me, when the consumer is well off, you do that. There are times and certain categories where we might choose to invest, and that's where some of the productivity and other things that we are doing help us. That's just competition, right? You'll see that happening more so around typical holidays and such, where we all want to make sure that we are retaining our customers and capturing a few new ones. Okay, great. Next, I wanted to talk about digital. Sure. I guess first on Drive Up & Go, can you talk a little bit about how you've been able to improve the profitability at the store level and then, on speed, which is obviously super important to the customer, maybe on average, how quickly are DUG orders ready for pickup? How fast do you think you can and need to get? Yeah, Beth. Great question. I'm a firm believer that speed matters in food. You'll wait for a four-hour window for a refrigerator. You'll do that because you get that once every five years, 10 years, and it's a big deal. You want it installed right at home, and so on. But if you're going to order food two, three times a week, even once a week, you don't want to wait for us. Speed matters. We are compressing delivery times, and we're able to do that because our deliveries are, our e-commerce business is built around our stores, and our stores are located in great places close to where you live. That's the philosophy we have. About right now, in a little over 300 stores, we are offering two-hour, either pickup or two-hour delivery, and we're going to expand that. It'll cover more than 85% of our customer base by the end of the summer. Right? Where we'll offer two hours, and we just think that's super critical. That's the customer back point of it. Now, if you accept that philosophy that you want speed and you need to therefore leverage your stores, then you work on what's going to make the profitability of that whole equation better. Right? Number one is continuing to reduce picking costs and doing everything you can to improve the efficiency in the store. You'll hit the limits of physics on that, and we do in many of our stores. When you get to a certain volume, you can't get more productive. We're excited about the MFCs that we're putting. We're going to add seven more this year, and we're trying different ways of doing it so that we can figure out many different, let me say, models, okay, models that we can then replicate around the country. That reduces the pick cost dramatically. The other cost is the delivery, but you asked about Drive Up & Go, and Drive Up & Go, with that, we don't have a delivery cost. She's coming to pick it up. In that context, we actually have a decent flow-through on our additional revenues that we're getting there. We're optimistic about the ability to be fast, and over time, improve the cost effectiveness of this whole model. Got it. You mentioned the MFC, maybe let's just touch on those. High level, how do the economics of digital fulfillment compare to DUG or delivery? What would be a reasonable timeline to expect the impact from the MFC to show up in the P&L? Yeah, to me, I think this is going to be a good year for us to not only optimize what we've got, and think of an MFC cost per order curve that over time goes down and down and down, and we're going down that curve, which we're excited about. I think by the end of this year, we'd have the model ready, right, so that we can start scaling it, our fiscal year. The way it does it is that it increases the number of items that are picked by the machine. Dramatically reduces the amount of labor you need for that order. That's the exciting. The smarter you are about picking more items from the MFC than having to go less into the store, the better the economics. The one thing I want to highlight, though, is that with the MFC capability, we offer a lot of things in our store that we do not want to compromise for our customer. You can get the steak cut the way you want it. We can bake a cake for you. We can make a flower arrangement for you. We don't want to lose those things that make us different and special for a customer because she has to trade on e-commerce, and that's why we like this combination that we're putting together. Got it. Back to DUG for just a second. This year you're expanding to 98% coverage by the end of the year. After you get there, from a digital perspective, as you look at your positioning versus peers, what's the next top priority? In terms of your customers, what do you think they would say is the number one improvement they want from you on the digital front? Beth, I don't know if we'll ever say we've arrived, but we have more work to do on our app. We've just launched what's a unified mobile app in three markets. In the past, you had an app that was for your ordering, an app for loyalty, and so on. We've merged all of that, and so we need to continue to improve, make that app a lot more frictionless for the customer. That's one area, our substitution logic needs to improve in that space. These are all, and we'll continue to improve it. We do think we've got some catch-up to do on that front. To me, that's one area. The second area is we've significantly elevated our on-time delivery and on-time filling for the DUG orders and such. To me, that you can never rest on that. I think we need to keep pushing it up into the high nineties. We'll continue to do that. I think this is always going to come down to, are you creating a frictionless experience when she orders, and are you delivering things and getting it to her with the quality she expected, with the right substitutions she expected, or no substitutions or a few substitutions as you go forward. Was the experience itself at the interface nice, when you picked it up or somebody dropped it off? Those are the fundamentals that we're focused on there. Great. Last one on digital. As the COVID restrictions ease, are you seeing any change in the level or type of digital engagement? Yeah, I think we're seeing more people coming to the stores, which is quite interesting. People are back in the stores. I think people want that experience, especially on the fresh side of that store. We're not seeing the same level of digital engagement growth as you can imagine from last year. We were 270 something, I think, in Q1. We're certainly not seeing that, but we're seeing more people shopping stores. What we love is that there's a lot of people doing both. That's our best customer. They spend 20% more when they engage in both. Okay. Just shifting gears to loyalty, which you mentioned a second earlier. Just for you, substantial growth in 2020, and I think now north of 25 million members. Are there still certain banners where the loyalty opportunity is particularly high? Just trying to see basically what's the runway left on loyalty? Oh, yeah. Historically, the banners that were Safeway in the past have higher penetration. There, the magic really is to drive more engagement. The banners that as you move to the middle of the country and into the eastern part of the country, it's about more enrollment. There's significant headroom if you get down to where I am in Jewel-Osco, and you just keep going east, there's a lot more upside on getting people enrolled. We're focusing a lot on making I mean, Beth, you can literally enroll now at your PIN pad. You just put your phone number in, and bang, you're in. We send you a text, and you're connected, and you can get into our programs and start engaging. We're trying to simplify and remove friction in doing that. There's plenty of upside on that front. And there's upside in engagement too, by the way. As people engage, they spend more, they become stickier. There's plenty of things we're doing to also increase engagement. Going soon, we're going to do a lot of things that go beyond what has purely been monetary rewards. It's been fuel rewards or incentives and promotions. We're going to go beyond that. Got it. 11 million new households, I believe, shopped your stores last year. For that cohort, what do retention rates look like? Maybe which of the changes you've made to your business do you think are most impactful from a retention standpoint? The retention rates are very good, as we are going through this quarter, and we're still in the middle of the quarter. What we are doing, the beauty with those 11 million customers is they're identifiable households, right? We've got data. We know when they're finishing a purchase. We are able to target what they bought and why they engaged with us, and we can be surgical about finding ways to keep them engaged in the categories that they came to us for. I think what we continue to see is this engagement in fresh, right, when they come in and try our products. Because it cuts across multiple income brackets and segments of customers, too, by the way. Our ability to target them because they're identifiable with what matters to them is what we are primarily focused on in our retention. Got it. Okay. Another key area of focus for you guys is, of course, your own brands. Can you just discuss maybe the path to your goal of 30% penetration from about 25% currently, and just given the impact that it can have, with gross margins 1,000 basis points higher than national brands, what gives you the confidence that you're going to get there? Because just like you asked me about the loyalty program, same phenomenon. If you look at our penetration by different markets, it's all over the place. There are markets now that are close to 30% already, we know it can be done. There are markets that are well below our average, which is about 25%. What's been the barrier? The barrier has been, in some of these markets, we didn't have the supply chain and the manufacturing ready to provide them and support them. Some of these markets, it was just a lack of focus on own brands. Those are easy things to fix. In fact, we're fixing all of those. You can get our own brands as far, wherever in the country now in many of our categories. Those types of things are relatively easy because we know it works. We know it works relative to the branded products in the markets because it's got the penetration. The other area is continuing to try to get into new categories. The team continues to innovate so that we can get into new categories. Bottom line, Beth, I think that the 30% we picked as an anchor point to say we want to get there, because we saw the white space just in what's available today. We're making that progress. I will say that we also want to make sure we're a house of brands. My guess is we'll keep pushing that envelope, but we'll also make sure we have A brands and B brands in our company. Okay, great. That's helpful color. Thank you for that. You touched on this kind of in your opening comments about, you now see $1.5 billion in productivity initiatives versus $1 billion prior. What's incremental there? Yeah. That two big initiatives. You need to understand the context of our company as to why this opportunity is there. The first wave of $1 billion was much more around buying our indirect goods, whether that's grocery bags, computers, everything, just consolidating that and putting some strategic sourcing capability behind it and generating dollars. It's around labor, it's around shrink. It's around promotion effectiveness. These were things that I look at and go, these are operating capabilities that we improved and to deliver productivity. There's two big buckets that we did not touch going into the first, say, 18 months or so, or six months into the pandemic. We've started, this is the next wave that we're doing. One is purchasing our cost of goods. We love our speed and nimbleness and the entrepreneurship that we have locally. We like that we run things independently, but we have not leveraged our scale when it comes to buying our cost of goods. We had not leveraged the network and the best practices that are available when it comes to operating our supply chain. Those are the two big areas where we see a lot of opportunity. In supply chain, it's about better efficiencies within our warehouses and then just stepping back and thinking about the broad network itself, on where we should take it for the future. On the cost of goods, it's about just good old-fashioned consolidation of buying. Got it. All right, thank you. A question we're kind of asking everyone at our Conference, since one of the themes is, of course, what's the post-pandemic world look like? Now that we can finally talk about that, as you think about all the big changes in consumer behavior that we've seen over the past year, what do you expect to be the most lasting and sticky versus what's probably a bit more temporary? I think the desire for convenience, this omni-channel shopping of grocery, I think is going to be more lasting. People have tried it. I think people are coming back to the store, but what I believe and what I actually hope for is that consumers have this healthy mix of digital engagement all the time and physical engagement in the store when they need that experience. Because that actually gives us a great combination of ways in which we can connect with that consumer, customer, personalize things for that customer, and still give them that experience they seek every so often coming to the store. To me, I think that's going to stick. I think for a while, my hypothesis is that, look, I personally believe if you have eaten a better cut of meat for 12 months, you've had a better bottle of wine for 12 months, et cetera, you just don't go right back to it. I suspect there's going to be this desire for better quality food for a longer time, right? Until maybe there's a big recession or something and people change behavior. I think that's going to stick. I suspect you're going to see a little more of at-home eating stick, but not because of what they did in the pandemic. It's more so because I think a lot of us are going to be spending more time working at home. One breakfast at home, one lunch at home. That's a massive change in spend. Yep, that certainly makes sense. Lastly, just on ESG, given a growing investor focus on the topic, I guess what are the top two or three ESG initiatives that you would highlight to investors? Then maybe in what area could you improve the most? Yeah. Beth, we are a company that has done a lot, whether it comes to energy consumption and energy conservation, whether it's community support, commitment to responsible seafood, the commitment to recycled or reusable or compostable plastic by 2025 in our own brand, so on and so forth. That said, we stepped back this year and completed a materiality assessment. We're going to come back in the fall with our commitments and goals around four themes. Clearly, around climate change, around waste reduction and circularity, around community impact, and around DE&I. We're doing the work to make sure that we can come out and commit to those goals. All right, great. With that, it looks like we're about out of time. Vivek, thank you again for your time today. It's greatly appreciated. We hope to see you again soon. Thank you all. Take care.