Albertsons Cos. Beats Q1 Expectations

Grocer reports higher profit, revenue and identical sales, fueled by store brands, digital growth and inflation effect
Lynn Petrak
Senior Editor
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Albertsons Cos. beat analyst expectations for the first fiscal quarter.

Albertsons Cos. exceeded Wall Street expectations for the first quarter, coming in with $24.05 billion in net sales and other revenue and a 4.9% lift in identical sales. Net income topped $417.2 million, or $0.72 per share, for the three-month period ending June 17.

The boost in identical sales was driven by retail price inflation, growth in pharmacy and increasing digital penetration, according to Albertsons. The grocer also underscored the growing demand for private label products as price-conscious consumers expand their purchase horizons; during the first quarter, Albertsons combined its store brands of Signature Farms, Signature Care and Signature Care under a single Signature Select portfolio.

Other performance indicators pointed to a stronger-than-anticipated start to the fiscal year for Albertsons. For example, the number of loyalty members hit 35.9 million, a 16% lift. The quarter was good for e-commerce, too, as digital sales grew 22% in during Q1

While many of the financials bode well for Albertsons out of the fiscal year gate, there were some downward movements. Adjusted EBITDA was $1.31 million during the quarter, compared to $1.42 million for the first quarter of 2022. Among other factors, the retailer cited fewer COVID-19 vaccines and a dip in gross margin rate. At the same time, higher warehouse and delivery costs and greater shrink/loss due to theft contributed to a 91-basis point decrease in gross margins.

[Read more: "SPECIAL REPORT: The Story Behind Shrink"]

CEO Vivek Sankaran said that the overall Q1 performance reflects the retailer’s resilience and the effectiveness of its transformation strategy. "As we look ahead to the balance of the year, we remain focused on driving operational excellence in our stores and continued growth in our digital and pharmacy operations. We will also continue to drive the initiatives supporting our Customers for Life strategy, including delivering on our customer promises, deepening our relationships with them, and serving them where, when and how they want to be served,” he remarked.

Sankaran acknowledged ongoing market challenges as the company looks ahead to the next quarter, another step closer to the intended merger with The Kroger Co. "We are also mindful of the evolving economic backdrop, including slowing food inflation, declining government assistance and higher interest rates, and their potential effects on consumer spending and our business,” he noted. “We also expect to see ongoing labor investment, broad inflationary cost increases and significant declines in COVID-19 vaccination and test kit revenue. These headwinds, however, are expected to be partially offset by the benefits of our productivity initiatives."

From an expense standpoint, Albertsons continues to invest in improvements with the completion of 43 store remodels, the opening of two new stores and additions to digital and technology platforms.

In a July 22 joint interview with the Denver Post, Sankaran and Kroger CEO Rodney McMullen were asked about the federal government’s new and tighter guidelines for mergers and acquisitions, proposed earlier this month and set to go into effect before the final Albertsons-Kroger review. They leaders said they were ready to proceed with legal action if the merger is rejected.

Boise, Idaho-based Albertsons operates more than 2,200 retail stores in 34 states. The company is No. 9 on The PG 100, Progressive Grocer’s 2023 list of top food and consumables retailers in North America. PG also named the company as one of its Retailers of the Century.

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