Albertsons' profit tops estimates and offsets revenue miss driven by lower fuel sales

By Ciara Linnane

Grocery chain CEO talks of 'difficult industry backdrop'

Albertsons Cos. Inc.'s stock rose 0.5% early Monday, after the grocery chain beat profit estimates for its fiscal fourth quarter, offsetting a revenue miss.

Boise, Idaho-based Albertsons (ACI) had net income of $250.5 million, or 43 cents a share, for the quarter to Feb. 24, down from $311.1 million, or 54 cents a share, in the year-earlier period. Excluding one-time items, the company had EPS of 54 cents, ahead of the 52-cent FactSet consensus.

Revenue rose to $18.339 billion from $18.265 billion, below the $18.455 billion FactSet consensus. Same-store sales rose 1%, while FactSet was expecting a 0.9% rise. Digital sales rose 24%, while loyalty members increased 16% to 39.8 million.

The revenue decline was driven by lower fuel sales and wholesale revenue, while same-store sales were boosted by growth in pharmacy sales.

Chief Executive Vivek Sankaran said the numbers came against a "difficult industry backdrop."

For 2024, "we expect to face ongoing headwinds posed by investments in associate wages and benefits, cycling significant prior year food inflation, lower government assistance for our customers, declining COVID-related income, and the increasing mix of our pharmacy and digital businesses, which carry lower margins," Sankaran said in a statement.

The company is expecting the headwinds to be stronger in the first half and to be partially offset by productivity initiatives.

Gross margins rose to 28.0% in the quarter from 27.8% a year earlier.

"The strong growth in pharmacy operations, which carries an overall lower gross margin rate, increases in shrink, and increases in picking and delivery costs related to the continued growth in our digital sales were the primary drivers of the decrease, partially offset by our procurement and sourcing productivity initiatives," said the company.

Albertsons is still trying to close its planned merger with Kroger Co. (KR), which has been stymied by regulatory pushback. The Federal Trade Commission sued to block the merger earlier this year, saying it would reduce competition, raise grocery prices and hurt workers. Several states have joined the FTC's suit.

The stock has fallen 11% in the year to date, while the S&P 500 has gained 4%.

-Ciara Linnane

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04-22-24 0938ET

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