Albertsons Delivers ‘Solid Operating Results’ for Q2

CEO Vivek Sankaran still expects challenging economic backdrop for remainder of year
Emily Crowe
Multimedia Editor
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Albertsons saw identical and digital sales increases for its second quarter of fiscal 2023.

Albertsons Cos. is sharing what CEO Vivek Sankaran called “solid operating results” for its second quarter, crediting an increase in identical sales, strong pharmacy sales growth, an increase in digital sales and retail price inflation as contributors to the grocer’s success.

Net sales and other revenue was $18.3 billion during Q2, ended Sept. 9, compared to $17.9 billion during the same quarter last year. The company also saw a 2.9% increase in identical sales, a 19% increase in digital sales and a jump in loyalty members of 17% to 37.4 million.

"During the second quarter, we continued to execute against our Customers for Life transformation strategy and drive solid operating results, despite increasing macro-economic headwinds,” said Sankaram. “We want to thank all our teams for their commitment to our customers and communities."

Continued Sankaran: "As we look ahead to the balance of the year, our focus remains the same – advancing operational excellence in our stores, driving growth in our digital and pharmacy operations, and deepening our relationships with our customers."

Gross margin rate for the quarter decreased to 27.6%, compared to 27.9% during Q2 of fiscal 2022. Net income was $266.9 million, or $0.46 per share, compared to $342.7 million, or $0.59 per share the year before.

Adjusted EBITDA decreased to $976.9 million, or 5.3% of net sales and other revenue, which the company attributes to a decrease in gross margin contribution from its fuel business and fewer COVID-19 vaccinations. The continued decline in demand for COVID-19 vaccinations and at-home test kits is expected to cause a $75 million headwind to Albertsons’ adjusted EBITDA for the remaining two quarters of the fiscal year.

"We are also mindful of a more challenging economic backdrop, including declining federal and state government assistance and higher interest rates, and their effects on consumer spending and our business,” said Sankaran. “We also expect slowing food inflation, ongoing labor investment, broad inflationary cost increases and significant declines in COVID-19 vaccination and test kit revenue. We continue to partially offset these headwinds with the benefits of our productivity initiatives."

During the first half of fiscal 2023, Albertsons’ capital expenditures totaled more than $1,084.3 million, which included 80 store remodels, the opening of three new stores and further investments in digital and technology platforms.

As for its impending merger with The Kroger Co., Albertsons reiterated its plan to divest select stores, banners, distribution centers, offices and private label brands to C&S Wholesale Grocers. The New Hampshire-based wholesaler agreed to buy the 400-plus Kroger and Albertsons Cos. stores across 17 states, along with eight distribution centers and two offices. The stores are mostly in markets where Kroger and Albertsons overlap and where antitrust issues might emerge during the review by the Federal Trade Commission (FTC).

As of Sept. 9, Boise, Idaho-based Albertsons operated 2,272 retail food and drug stores with 1,726 pharmacies, 401 associated fuel centers, 22 dedicated distribution centers and 19 manufacturing facilities. The company has stores across 34 states and the District of Columbia with 24 banners, including Albertsons, Safeway, Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets and Balducci’s Food Lovers Market. Albertsons 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 one of its Retailers of the Century.

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