Albertsons Companies, Inc. (ACI) Q1 2020 Earnings Report, Transcript and Summary

Welcome to the Albertsons Companies First Quarter Earnings Conference Call, and thank you for standing by. [Operator Instructions] This call is being recorded. If you have any objections, please disconnect at this time. I would now like to hand the call over to Melissa Plaisance, GVP, Treasury and Investor Relations. Please go ahead.

Hello and thank you for joining us for the Albertsons Companies' First Quarter 2019 Earnings Conference Call. With me today from the company are Vivek Sankaran, our CEO; and Bob Dimond, our CFO. Today, Vivek will touch on our recent results, share some observations, discuss some of our plans to grow and improve our business and provide an update in a number of key operating areas. Bob Dimond will then provide an overview of our first quarter results, and Vivek will then make some closing comments. I would like to remind you that management may make statements during this call that includes forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not limited to historical facts, but contain information about future operating or financial performance. Forward-looking statements are based on our current expectations and assumptions, and involve risks and uncertainties that could cause actual results or events to be materially different from those anticipated. Additional information concerning factors that could cause actual results to differ materially from those in forward-looking statements will be contained from time to time in our SEC filings, including on Form 10-Q, 10-K and 8-K. Any forward-looking statements we make today are only as of today's date, and we undertake no obligation to update or revise any such statements as a result of new information, future events or otherwise. Please keep in mind that included in the financial statements and management's prepared remarks are certain non-GAAP measures, and the historical financial information includes a reconciliation of net income to adjusted EBITDA. And with that, I'll hand the call over to Vivek.

Thanks, Melissa. Good morning and thank you for joining us today. As many of you read this morning, we continue to make very good progress and are delivering solid results. During our first quarter, we had identical sales of 1.5%, and our adjusted EBITDA was approximately $877 million representing 7.5% growth over our first quarter of last year. We have momentum in sales and are demonstrating steady, reliable EBITDA growth. At the same time, a combination of strong free cash flow generation from the business and proceeds from very accretive asset sales, evidenced by the premium to market we received on the sale price and low-cap rate, has allowed us to make significant improvements on our balance sheet, reducing outstanding debt by nearly $1 billion since year-end. Since the beginning of fiscal 2018, we have reduced our principal debt balance by nearly $2.4 billion. We are pleased with the work we're doing to reduce leverage and improve our financial flexibility. We've reduced our total net debt to adjusted EBITDA ratio to 3.3x at the end of the first quarter, and we expect to make further progress over the balance of the year with free cash flow generation and our recently completed sale-leaseback transactions. We, therefore, have a clear path to our stated goal of reducing our total net debt to adjusted EBITDA ratio to 3x. I have spent the last 3 months visiting our stores, distribution centers, manufacturing plants and division and corporate offices. I've spoken with many of our customers, associates, vendor partners, bankers and analysts to better understand our business and industry dynamics, assessing our strengths and opportunities. I've come away very encouraged about our prospects to serve our customers even better, in-store and online, and elevate our performance going forward. Overall, our goal remains to be the favorite local omnichannel supermarket that delights our customers with the freshest, high-quality products and meal solutions at a competitive price with an outstanding customer experience. Over the last few years, we have brought together great retail brands with rich heritage and a strong local following. The significant task of integrating systems and converting stores and DCs to a common platform is now behind us giving us greater transparency and comparability across our network. In addition to being locally great, we now have the ability to be nationally strong. We are going to build on this foundation and elevate the performance of our stores, accelerate our eCommerce business, grow our loyalty programs, grow our own brands, strengthen our partnerships with the supplier community and celebrate the diversity of the 270,000 frontline associates who delight customers every day. Technology will underpin everything we do. We are building a robust and modern technology infrastructure and enabling our growth, productivity and talent agendas with new technologies. As we have mentioned before, we will continue to invest in remodeling our fleet of stores. I will touch on a few of these topics today and continue to elaborate on this in future discussions. Our eCommerce business grew 33% last quarter. Our overall eCommerce strategy is to lead in areas that play to our fresh and local strengths and to invest in areas where it makes sense using current models already in the market. We are accelerating investments in the expansion of our capabilities in eCommerce to provide value to our customers and drive sales. For instance, we're enhancing our websites and mobile applications for eCommerce that are modern and user-friendly with integrated navigation and new search engines. We've also enhanced the communication with our customers to let them know via text when their eCommerce orders are on their way. We've expanded our Drive-Up and Go pickup service to over 300 stores currently and plan to expand to over 600 stores by fiscal year-end 2019. We also have expanded our fast delivery through Instacart, which allows our customers to have access to same-day delivery in as little as an hour. Instacart was operating in all 13 of our divisions and over 2,000 stores at the end of our first quarter. Our plans in eCommerce are to: pilot and partner in 2019 to build and grow a more economic and scalable eCommerce model using micro fulfillment centers; maximize our store infrastructure through the integration of our point-of-sale systems with various third parties, such as Instacart, Uber Eats, DoorDash and Grubhub; accelerate the growth of Drive-Up and Go using a combination of our own operations and third parties; and continue to enhance our customer-facing applications to be more efficient and user-friendly. We're also accelerating investments in digital marketing and loyalty programs to effectively attract new customers and retain and grow customer loyalty. Our customer loyalty program continues to grow in size and importance to our business and our shoppers. Registrations in the program grew 24% year-over-year. We have completed the rollout of the just for U loyalty program to Jewel, Acme and Shaw's giving the program full national scale across our divisions. Our loyalty program is a proven driver of sales growth and customer retention. The program also enables advanced personalized marketing to our shoppers and robust data to enhance merchandising decisions. The data we are collecting allows us to more effectively determine the best assortments, product placements and adjacencies on shelf and improves our promotional strategies. It also enhances competitive store response planning and measurement as well as influencing the media buying. These data-driven marketing and merchandising capabilities are also driving sales for CPGs with CPG investment into our platforms up 49% versus a year ago. Turning to Own Brands. Our portfolio now consists of more than 11,000 high-quality products. Own Brands' sales penetration continues to grow reaching 25.3% in Q1, our highest sales penetration to-date. We believe we have significant room for growth through greater penetration in some of our divisions, better utilizing the breadth of brands in our portfolio to serve a variety of customer need and our innovation pipeline. We launched 234 new items during the quarter with plans for more than 600 this year. We believe our customers look for brands that match their lifestyle. And as a result, O Organics and Open Nature, Albertsons' organic and free-from brands are growing at 11.5% over last year, are now represent 23.6% of the total natural and organic sales at Albertsons, 152 basis point growth from Q1 last year. Sustainability is always top of mind in our brands portfolio. And during Q1, Albertsons announced a new initiative to reduce plastics use and set the following Own Brands goal: 100% of Own Brands packaging will be recyclable, reusable or industrially combustible by 2025. Let me touch on productivity. We expect technology to underpin our productivity agenda in several areas of our business. We're upgrading our pricing and promotional tools using data analytics that we believe will allow us to better optimize pricing to drive more strategic investments in price where we believe it will best resonate with our customers. In addition, we intend to roll out enhanced demand forecasting and replenishment systems to improve our operating efficiency with regard to labor and inventory management. We also continue to expand our self-checkout systems in many markets where our customers are responding enthusiastically. Lastly, as we've mentioned previously, we're working to automate several distribution centers over the next few years, which should greatly improve our labor productivity in the supply chain, increase storage density, enhance inventory management and shorten stocking time lines. The acceleration of these investments in fiscal 2019 is part of a concerted effort to better utilize technology, automation and AI across all elements of our business. We believe these investments will generate significant savings going forward that will allow us to fund future growth. Regarding capital expenditures, we continue our disciplined approach. During the first quarter, we spent approximately $362 million and expect to spend approximately $1.45 billion during fiscal 2019. We have greatly increased our investments in technology during fiscal 2019 as we seek to optimize our systems to build the future. At the same time, we still believe deeply in our brick-and-mortar business. And as such, we will continue to invest significantly in our stores. We expect to complete approximately 280 to 300 remodels during the year in fiscal 2019 and open 15 to 17 new stores. During quarter 1, we opened 6 new stores and remodeled 28 stores. Now I will ask Bob to cover our first quarter results.

Thanks, Vivek, and hello, everyone. Top line sales increased $85 million or 0.5% to $18.74 billion during the first quarter of fiscal 2019 compared to $18.65 billion during the first quarter of fiscal 2018. The increase in sales was primarily driven by our 1.5% increase in identical sales, partially offset by a reduction in sales related to store closures during fiscal 2018. Gross profit margin increased to 28% for the first quarter of fiscal 2019 compared to 27.7% for the first quarter of fiscal 2018. Our gross profit margin benefited from industry-wide, better-than-expected fuel gross margins during the first quarter of fiscal 2019. Excluding the impact of fuel, gross profit margin increased 10 basis points. Shrink expense was lower than a year ago, which continues to be an opportunity for us as we cycle store system conversion activity from last year. Advertising costs were also lower than a year ago. However, these improvements were partially offset by industry-wide reimbursement rate pressures in pharmacy. Selling and administrative expenses decreased to 26.2% of sales during the first quarter of fiscal 2019 compared to 26.7% of sales in the first quarter of fiscal 2018. Excluding the impact of fuel, selling and administrative expenses as a percentage of sales also decreased 50 basis points during the first quarter of fiscal 2019 compared to the prior year. The decrease in selling and administrative expenses was primarily attributable to lower acquisition and integration costs as the store system conversions related to the Safeway integration were completed during fiscal 2018 and the continued realization of the company's cost reduction initiatives. These improvements were partially offset by higher employee wage and benefit costs. Interest expense was $225.2 million during the first quarter of fiscal 2019 compared to $254.6 million during the same quarter last year. The decrease in interest expense is primarily attributable to lower average outstanding borrowings during the first quarter of fiscal 2019 compared to the first quarter of fiscal 2018. The weighted average interest rate during the first quarter of fiscal 2019 was 6.5%, excluding amortization and write-off of deferred financing costs and OID. Adjusted EBITDA was $876.8 million or 4.7% of sales for the first quarter of fiscal 2019 compared to $815.8 million or 4.4% of sales in Q1 of last year. The 7.5% growth in adjusted EBITDA primarily reflects the company's increase in sales, better-than-expected fuel margins and the continued realization of our cost reduction initiatives. Net cash provided by operating activities was $802.7 million for the fiscal 2019 year-to-date period compared to $911.6 million in the prior year period. The decrease in cash flow from operations was primarily driven by changes in working capital related to accounts payable and inventory, partially offset by improvements in operating income, which includes the reduction in acquisition and integration costs. The difference in year-over-year working capital in the first quarter was largely due to the store system conversions last year. We are pleased with our results for the quarter and our ability to generate significant free cash flow. From a debt management perspective, as Vivek indicated in his opening remarks, we are extremely pleased with what we've been able to accomplish since the beginning of fiscal 2018. Last year, we reduced our principal debt balance by approximately $1.4 billion through a combination of our term loan refinancing and the repurchase of Safeway and NALP notes in the open market. This year, we have reduced the amount of outstanding NALP and Safeway notes by an additional $1 billion through a combination of our tender offer and open market repurchases using cash on hand. This activity reflects our continued commitment to delever the balance sheet, reduce interest expense and improve our financial flexibility. Subsequent to the end of the first quarter of fiscal 2019, the company completed 2 sale and leaseback transactions resulting in total proceeds of approximately $886 million net of closing costs. In connection with the transactions, we entered into lease agreements for each of the properties for initial terms ranging from 15 to 20 years. The aggregate initial annual rent payment for the properties will be approximately $50 million. These transactions were opportunistic in nature and together with the free cash flow generated from the business will allow us to reduce funded debt further and reduce our net leverage this year to approximately 3.1x. And now Vivek will provide some closing remarks. Vivek?

Thank you, Bob. We were pleased to see continuing momentum in identical sales in Q1. Our efforts at remerchandising and refreshing our store base is improving the in-store experience. And as we enhance technology and better leverage data, we are improving the online experience. We will continue to focus on our strengths in the short term, including by growing our innovative Own Brand and delivering a differentiated in-store experience, while at the same time investing into the future to create a long-term next-generation food retailer. As we indicated previously, we made great progress on our balance sheet today and will continue to do so as we generate significant free cash flow moving forward. I will now turn the call back to the operator for questions.

[Operator Instructions] Our first question comes from Bryan Hunt, Wells Fargo Securities.

Bob, I was just -- based on your 3.1x leverage target by the end of the year and kind of where you stand on LTM EBITDA as well as the sale-leaseback proceeds you'll receive after this quarter, it appears that assumes a very little, if any, EBITDA growth for the rest of the year. Is that a -- is that the way you're coming out as well to get to that 3.1 target?

Well, as you saw, Bryan, we have not provided guidance for the year. So I'm not going to be able to comment specifically on where those things are. We're really excited, though, about the opportunities that having these 2 additional successful sale-leasebacks, the proceeds of which is roughly $800 million, will provide us the ability to pay down debt. Now you're right, 3.1x is where we expect to be after we apply those proceeds that's indicated there. And we think great progress from where we were just a couple of years ago when you're looking at roughly 4x debt-to-EBITDA ratio.

Great. My next question around the sale-leaseback. You've given us an idea of what those assets historically where you don't sale-leasebacks kind of appraise for relative to what you yielded. Can you talk about what was the relative value of those appraised assets versus what the market value ended up being?

Yes. Well, maybe what I can do is give you a sense for -- if you cobble them all together now. As you might recall, we had about $12 billion of appraised assets before we started doing the sale-leasebacks a couple of years ago. That has reduced now by roughly $2.4 billion and now sits at $9.7 billion of owned appraised assets that remain. Now comparing that to roughly the $3 billion of proceeds that we brought in, that means that we sold on average above appraised value of about 24% on those transactions. The cap rates that we've been able to take advantage of this great real estate market have been phenomenal. And that's one of the reasons why we've decided that this makes sense to do now and have executed these transactions.

And 2 more questions. One, there's a lot of press on labor negotiations in California and some as well, I believe, in Oregon. Can you talk about when you cobble together the historical Safeway numbers and Albertsons numbers, what the impact was to overall sales and EBITDA from the last strike in California?

No. Bryan, I'll tell you, we are -- we have -- I think about 2/3 of our labor force is unionized. We continue to negotiate every year with various unions. The negotiations we're doing now are proceeding well. They are proceeding like we expected. We've closed several on the East Coast and the West Coast, and we feel good about where we are proceeding. We are not thinking about the past. We're looking into the future here and feel good about it.

Great. And my last question is headlines the last couple of days about SNAP payments and the potential reduction in the amount of SNAP payments going down because of some duplicative payments between various governmental organizations. Can you talk about what your overall SNAP payments are as a percentage of sales?

Yes. Bryan, our SNAP sales are very small. They represent roughly 3% of our total sales. I believe the article that you saw that came out indicated a 4% reduction approximately to the overall SNAP benefit nationwide. So you extrapolate that out, it will have a very minor impact to our IPs.

Our next question comes from William Reuter, Bank of America Merrill Lynch.

This is Mike on for Bill. First question here is some supermarkets have pointed out that there's been increased competition in the produce section. Are you guys seeing any pressures there as well?

Not yet, Bill (sic) [ Mike ]. We offer a great -- our offering is tremendous. We have a big mix of natural organic. We continue to see growth in the overall fresh section in the produce section. We are not seeing any effects of that nature.

Great. And then second, could you guys talk about directionally where you see delivery as a percentage of total sales going, maybe not only just you, but in the supermarket space?

So what we believe, we offer both delivery and Drive-Up and Go where we can pick it up in the store. We have a more nuanced delivery. We offer delivery next day, delivery within the hour if you wanted, within a couple of hours if you wanted. We believe that we see customers going in different directions, maybe more in some markets, less in some markets with -- where we could use different mechanisms. And we're going to continue to offer it. And like everyone else, we continue to optimize how we do it, so that we can have a great service and have great financials behind it.

Great. And then lastly here, could you talk about what you're seeing in the M&A pipeline? Seems that regional chains have been struggling. How are the valuations for these targets trending?

Yes. As you know, we've grown through acquisition over time. We tend to look at most of the transactions that you may be referring to that are out there. And we don't really comment on valuations or any that are currently up there on the mix. What I would say is that we'll continue to opportunistically look at opportunities to do tuck-ins, if they're solid assets and if we think that it's going to add some nice synergies to us, which, as you know, in the past we've been able to do so without bringing leverage in a lot of cases where we're able to do in end-market acquisitions.

Our next question comes from Jenna Giannelli, Goldman Sachs.

I know you mentioned in your press release that you plan to use the proceeds from the sale-leaseback transaction for debt repayment. How do you envision applying those proceeds? Are you thinking about the term loan or more bonds outstanding, open market repurchases, tendering? Any color would be helpful.

Yes, Jenna. We do plan on utilizing the proceeds. We're just evaluating our options right now. I think the easiest and most straightforward certainly would be to take out the term loans. We have done a lot of work over the last few months, as you've probably seen, in taking advantage of tender offers and so forth with our bonds. So I think that most likely is probably something with our term loans, as you indicate, but may include a combination of a few things.

Okay. Perfect. That's really helpful. And then I just wanted to ask you on the comp. I think the 1.5% was strong and bested a lot of the investors' expectations that we talk to. I guess can you talk to us a little bit about what are some of the components of that comp. I mean it looks like you outpace them in the broader inflation numbers this quarter. So any commentary on your traffic or the basket mix that you're seeing and just the general cadence of the comp that you saw during the quarter would be great.

Yes. Jenna, we don't provide the breakout, haven't done so for quite some time on traffic basket. We do tend to focus on what will grow our loyalty numbers and everything else, but we are happy to see the uptick to the 1.5%. We're hopeful that it can continue to grow from there. This is our sixth straight quarter of positive IDs. So I think that we feel very good about the momentum that we're seeing here this year.

Okay. And then just finally, if I may. I know you've talked about your longer-term leverage target in 3.1 by the end of the year. I guess -- 2 parts to that. Any thoughts on where you need to be in order or before you could pursue some sort of a public offering? And then, I guess, commensurately, do you have any rating goals in mind? I think your leverage levels are now starting to approach somewhere maybe as you rated peers. So is that something that's been on your radar or a longer-term goal as well as you think about leverage?

Yes. We have been working hard on the leverage and reducing that. You maybe saw that we just got our ratings improved over the course of the next couple -- or last couple of months. S&P raised us across the complex up a notch, if you will. Moody's took us from negative to stable. So we're pretty happy with that. And we stated that a goal here a couple of years ago about working down towards 3x leverage. Effectively with the application of these sale-leaseback proceeds we'll be almost there. So not to say that the next step won't be to take it below 3, which it will just in the ordinary course of paying down normal free cash flow or paying down debt with normal free cash flow. On your first question, we think that it does position us. We gave kind of in this 3 range well, so that when the timing is right and everything else lines up for us that an IPO can be in the future.

Our next question comes from Geoffrey McKinney, Citi.

To follow up on Bryan's earlier question on the asset sales. Can you give us a sense? The distribution center you sold, what was the contribution to the total proceeds from that asset relative to the 50 stores?

We haven't provided that level of specificity, Geoff. So I'd rather not go down to individual asset basis on that.

Okay. And then to confirm, you operate 23 DCs. I think to this point, you'd sold or monetized 10. So your current ownership is about 13 distribution centers?

Yes, that sounds right. We really track things as a percent of total. We -- it just so happens that we now own about 40% of our owned -- 40% of our stores as well as 40% of our distribution centers.

Okay. And 2 more. In terms of capital structure mix, I guess, another way to ask the question. What do you think is the right mix of bank debt versus bonds or secured debt versus unsecured at this point, given the amount of unsecured debt you've retired to-date?

That's a good question. We've been over time trying to get rid of some of those long-dated bonds that were out there, although we've taken advantage of some of the unsecured market that's been out there on the near term. So we do think that we -- that having a good mix of long-term debt versus a prepayable term loan debt is healthy. That way we can, as we generate free cash flow, be able to pay down the term debt in a logical fashion and not incur a bunch of fees.

Okay. That's helpful. And then I think on the last call you'd mentioned that you expected fuel margins to likely be a headwind in 2019 as you were thinking about kind of the forwarded bid. Given the tailwind that we saw in 1Q, would you expect that headwind to start to flow through in the next quarter? Or how should we be thinking about that if your expectations changed?

Yes. It's hard to know at the time that we said that at the end of the fourth quarter, that's after we saw the rapid decline in fuel cost and retails, for that matter. And we didn't necessarily anticipate that we'd see kind of a second wave of that, which we did here in one of the months in Q1. I'm not anticipating that we'll continue to seeing a lot of that going forward as far as continued good news. But you just don't know. It's all driven by the market. We do anticipate that as we start matching up to the fourth quarter that, that will be a little bit of the headwind as we've indicated before though.

Okay. And I guess bigger picture. I think on the last call you had indicated that you would likely provide guidance on this earnings call. Any drivers for why you kind of move back to the historical mode of not providing any forward guidance? And should we expect it at any point in the future?

Hey, Geoff. This is Vivek here. The answer is very simple. Look, I'm 90 days in. The business is on a very good foundation. And a lot of the things I've observed is that, as I said earlier, that the integration and conversion is behind us, and now we're able to operate at much larger scale. We're considering a lot of different puts and takes in the business working as a management team, working with the Board to develop a plan that we believe will continue to accelerate growth, right, drive growth, drive productivity, serve our customers better. And we just need some more time for those plans to come together. But note that it will be a balanced approach and that we will be coming back to you soon with that.

Okay. And I guess the puts and takes you're thinking about that might have any meaningful impact this year, any color you can provide there?

I cannot provide guidance for this year yet on this call, Geoff. We'll come back to all of that as we get some clarity.

Our next question comes from Karru Martinson, Jefferies.

So just in terms of the one piece of guidance that you gave of being at 3x by year-end. If we were 3.1x today on a pro forma basis after the first quarter, what's the kind of the cadence of getting there? Is it really that we just kind of grind this out? Or is there something there that pushes us to 2 or below that number?

Well, with the sale-leaseback coming in, that is what gets us to roughly 3.1 on a net debt basis, so applying that against the debt just kind of keeps you at that level. And then I'm kind of talking about snapshot and time here. We always have our natural build in working capital in our third quarter that is actually a use of cash. But then that follows through with the kind of washing that out towards year-end. So we're kind of expecting a little bit of improvement as we go through the end of the year and just our normal working capital seasonality, but that's how you get from the 3.1 to the 3.0.

Okay. And then in terms of the CapEx with the new stores, the remodel, the tech, I mean, it doesn't sound like we should be thinking about anything that's really transformative there. Or is there anything tucked into that, that we should be aware of?

Can you clarify the question for us?

Just in terms of your use of cash here, given the remodels and the new stores, the tech that you're spending, I mean, it doesn't seem like there are any major new initiatives underway that are different from before. Is that correct?

I would say, first of all, there are a few things that are kind of exciting that are new. First of all, probably the bigger piece of the dollars are going towards remodels, and that is very important to keep our store base fresh and progressing forward. But we are spending at a slightly higher pace in areas such as IT, for example, where we're spending to support our eCommerce growth. We have other initiatives that are helping to grow digital or universally as well as we have some productivity-type investments that are also somewhat IT driven that relate to the automation of distribution centers, for example, the testing of micro fulfillment centers, for example, that are going to improve things. So I think that those -- we have some other new store renovation as well that we're working on as well. So there's actually a lot of exciting things that are going on out there that will not only help support providing good returns for us, but also drive business forward.

Okay. Just lastly, in terms of the competitive environment. How has that changed with Amazon coming into the space? There's been a lot of headlines, but it doesn't seem to be all that much on the ground.

This is Vivek here. I'd say the competitive environment is not fundamentally different from the last several months. We think it's a rational environment. Everybody is trying new things much like we are to serve our customers better. And so, to me, regarding Amazon coming in the way, I see that is -- that's an affirmation that you need assets on the ground. You need stores on the ground. And we talk about this notion of being an omnichannel supermarket, I think just reinforces the theory. And so we see a lot of promise in what we are doing in a competitive but a similar -- an environment that's quite similar to what we've seen recently.

Our next question comes from Carla Casella, JPMorgan.

I'm wondering if you saw any benefit from the strike at Stop & Shop in the Northeast?

Yes, Carla. We did see some benefits there for that 11-day time period that they were closed. What I will say, though, is that, that when it washes against total company sales becomes a pretty small piece of our ID. And, in fact, it kind of offset some of the tough comparisons that we had year-over-year in weather on the East Coast. So I would say that when you net those 2 things together, it's kind of a wash for our first quarter ID.

Okay. Great. And then just on the debt paydown piece of it. Was there some point you'll give us then the balances on the different Albertsons and Safeway notes? Bloomberg picks up the tender, but none of the buybacks.

Yes. We'll follow up with, Carla, a little bit on that. You're right. We do have -- most things are updated in Bloomberg, I believe, but we can clarify that for you.

Yes. And then just on the sale-leaseback proceeds, and in the past either buybacks or tenders that you've done. Is there a reason why you tendered at one point and did buyback separately just in the open market and the other? And going forward, do you think you need -- given that you've taken out so much of them already, do you need to do tenders and make it public to everybody? Or can you do one-off buybacks in the open market?

We just got to take a look at what the opportunities are there. We did start off with the tender, and what came out of that is what got offered up by the individual players. And then we ended up with some separate open market opportunities that were presented outside of that process. So it just depends how everything comes to us or how the opportunities present.

Okay. And does the structure of having Safeway, New Albertson's and Albertsons just separate -- does that hinder any of your potential IPO prospects? Would you need to clean up the structure completely before IPO-ing? Or you can just -- you're more being just opportunistic in the market?

We do not need to have it cleaned up before we do an IPO. It is purely opportunistic. If you look at what we were able to accomplish, we were able to buy back $1 billion worth of debt year-to-date at a nice discount to par as well as maybe almost, more importantly, we've -- just the ones that we've done this year year-to-date represent, as we move forward, a $75 million interest savings because you're taking out kind of weighted average 8% -- lower 8% debt. So we think that yes, those were smart moves. And we're getting down to kind of smaller amounts now that are leftover, but we still think that's an opportunity to pick some up at folks who are wanting to get out, but we have taken a lot of that off the table over the last 2 years.

Our next question comes from Hale Holden, Barclays.

I just have 2. I was wondering if you could give us a sense of what you were thinking on inflation in the back half of the year, particularly with what looks like increased protein costs across the complex.

Yes. What I would say on inflation -- I mean it's been pretty stable here. The last quarter or so, if you take a look at it for the -- for our fiscal first quarter that ended kind of the first week or so in May -- second week in May, we had averaged right around 1.1%. And that was just a slight uptick from what the fourth quarter was. If you kind of take a look at it from what the USDA puts out as their forecast for the remainder of the year, they're -- they have kind of a wide range, but they're suggesting that it's 0% to 1.5%. So we're right in the middle of that today, and we would anticipate that we may continue on at this level for potentially a slight uptick.

There's nothing out of the ordinary adjusting.

Great. And then my second question is you guys have had Instacart kind of broadly rolled out here for a couple of months. I was wondering if you could share any metrics or any takeaways in terms of if it's cannibalistic, if you think it's accretive. What you're seeing for baskets or customer takeup or if it's new customers, et cetera?

Yes. I'll tell you how we think about it. It's got a good partner with us, and they complete a part of the offering that our delivery system cannot do, right, which is something that is shorter term, 2 hour, 1 hour windows, and we work with many partners. So that relationship is going well. We'll continue to use them in various places. And by the way, as we build -- what we are focusing a lot on is making sure that the interface with the customer is solid and that we are continuing to drive productivity in the way we pick products, and then we'd use various parties such as Instacart for the delivery.

Our next question comes from Patrick Barwin, Aegon.

Patrick? We can't hear you, Patrick. Patrick, we're not able to hear you. Operator, are you there?

We've moved on to the next question. Our next participant is Bryan Hunt of Wells Fargo Securities.

Just a few follow-ups, and then we can all go to lunch on the East Coast. My first question is you all closed roughly 1.5% or 1.4% of your store base year-over-year. Can you talk about what the accretion was to IDs from those store closures and maybe how many of your customers you retained from those closures?

It varies, Bryan. We don't have those stats, and we don't provide individual store or market level information. But we take those into account in the decisions we make. But what I would say is that's going to be a very, very small percentage impact to the total ID.

Okay. Great. My next question is when -- you're doing a significant number of remodels. That number is accelerating year-over-year. When you look at the remodels you've done in the first quarter as well as all of last year, what type of lifts to sales did you achieve in those remodels? And are you expecting anything different in terms of the tempo of sale lifts on the next roughly 260 you'll do this year?

Yes. They're all a little bit different. Some of them, as you know, might be a defensive remodel, some may be a...

[indiscernible]

Yes, that generate growth. So what I would say is overall we're hopeful to see somewhere in the 5% to 10% maybe as an average, but they're all over the place.

Great. And then my last question is when you look at openings and closings, are you expecting any significant closings for the remainder of the year? And when you look at your openings, what type of tempo do you expect over the next 3 quarters?

Well, for the full year, we're currently expecting 15 to 17 stores. And the reason why a range, it's possible that there could be a couple of delays and [ can balance ] for the next year.That's the new store. And we had 6 opened in the first quarter. I don't know that it's an even cadence through the year, but that will grow to roughly 15 to 17. As far as closures go, we evaluate that on an ongoing basis, on a quarterly basis. We run our stores for cash when we identify that we may have some bubble stores. We evaluate those carefully and take into consideration maybe just momentary blips in the market that we've got, road closures and whatever this just temporarily affecting a store. But we are not expecting a large number to close this year, although there will be some.

Yes. And looking at your closures and your openings, are there any relative geographic concentrations in the closures and/or the openings?

Not really. They're spread out over our market.

We have reached the end of the question-and-answer session. And I would now turn the call back over to Melissa Plaisance for closing remarks.

Thank you, everyone, for participating in this call. [indiscernible] and I will be available for the balance of the day if you have any follow-up questions. Have a great day.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.