Albertsons: Intense Competition Likely to Pressure Margins, but Operational Improvement Encouraging

No-moat Albertsons, with its network of over 2,200 stores, operates as one of the largest grocery retailers in the United States. After purchasing over 600 Albertsons stores in 2006, Cerberus Capital Management expanded its footprint through its 2013 deal with Supervalu to acquire nearly 900 supermarkets, and just a year later pursued an acquisition of Safeway. Now, with stores spanning across 34 states and a more than $75 billion top line that gives the firm a strong standing with suppliers, Albertsons’ presence in US communities appears well entrenched. We also note that the grocery industry benefits from steady demand as food-at-home spending per capita typically increases at a low-single-digit pace, helping to limit mismatches in industrywide supply and demand and thus providing some stability to Albertsons’ financial outlook.