Albertsons (ACI  ) made its debut as a public company on the New York Stock Exchange and raised $800 million in its IPO. The company initially planned to offer 65 million shares between $18 and $20 for a total of $1.2 billion to $1.35 billion. However, due to lower than expected demand, it was only able to sell 50 million shares at $16 for $800 million.

This gives the company a value of $9.3 billion. Since opening, it's mostly traded slightly lower between $15 and $16. The company had attempted to go public twice in the last five years, but both attempts failed. It attempted a merger with Rite Aid (RAD  ) in 2018 which was blocked by regulators. Another attempt was in 2015 which was pulled due to poor market conditions.

Albertsons Profile

Albertsons is owned by a consortium of private equity companies that have been rolling up smaller grocery chains. They continue to make up the majority of its shareholders. In total, Albertsons had 2,252 locations in 34 states under a variety of different brands including Acme, Albertsons, Safeway, Vons, Star Market, and Jewel-Osco.

Its financials show that in its latest quarter, the company had $15.44 billion in sales which was a 34% increase over the same quarter in 2019. Of course, some of this is due to the one-time effect of the coronavirus with many restaurants shut down and people stockpiling groceries and other items. Gross profit margins were 28.6%, and net income for the quarter was $67.8 million

Digital sales were also 32% higher as the company has rolled out a unified, smartphone app for all its stores that offers digital coupons. Albertsons has heavily invested in this and see this channel as being the next source of growth for the company. The app gives them detailed information on customer behavior and lets them offer personalized deals to customers.

Grocery Stocks Have Been Poor

Many grocery stocks have reported strong numbers this quarter due to these effects. However, historically grocery stores have been poor investments. For one, there is constant competition which is going to get even more intense now that Walmart (WMT  ), Target (TGT  ), and Amazon (AMZN  ) are competing in the space.

These companies don't see groceries as a profit-center, rather for them it's simply a way to get people in the store, so they can sell them higher-margin items. Other negatives include the high costs of running a grocery store since they require lots of workers, managing relations with suppliers, and constant turnover in inventory.

For these reasons, grocery store bankruptcies are routine. There are always new entrants in the space. For example over the last decade, there are Amazon, Target, and Walmart. European grocery chains like Aldi and Lidl have also entered many markets. Dollar store chains are offering some items. On the higher-end, there have been more premium places popping up like Trader Joe's, Sprouts (SFM  ), and Whole Foods.