MW Albertsons warns of lower-than-expected profit ahead as it gears up to go it alone

By Ciara Linnane

Grocery chain is relying on digital and loyalty program to boost growth since its planned combination with Kroger fell apart

Albertsons Cos. Inc.'s stock fell 4% early Tuesday, after the grocery chain's better-than-expected fourth-fiscal-quarter earnings were offset by guidance that lagged consensus.

The Boise, Idaho-based company $(ACI)$ posted net income of $172 million, or 29 cents a share, for the quarter ending Feb. 22, down from $250.5 million, or 43 cents a share, in the year-earlier period. Adjusted for one-time items, earnings per share came to 46 cents, ahead of the 41-cent FactSet consensus.

Sales rose to $18.79 billion from $18.34 billion a year ago, also ahead of the $18.64 billion FactSet consensus.

Same-store sales rose 2.3%, while FactSet, based on its analyst survey, was expecting a 1.8% rise. Same-store-sales growth was driven by strength in pharmacy.

Chief Executive Vivek Sankaran said the quarter ended with positive momentum, as the company continued to invest in its "Customers for Life" loyalty program, one of several planks it's relying on for growth since the collapse of its planned merger with bigger supermarket rival Kroger Inc. $(KR)$.

The Kroger deal fell apart after it was blocked by courts and regulators on concerns it would dampen competition in the grocery space in regions where both companies are active.

See now: Albertsons is now suing Kroger for billions. That won't help it find another buyer, analysts say.

The company said in January it would build out its online-sales infrastructure, invest in wellness and lean into the recently simplified rewards program in an effort to boost growth.

Albertsons said it now expects fiscal 2025 adjusted earnings to range from $2.03 to $2.16 a share, well below the $2.28 FactSet consensus. It expects same-store sales to grow 1.5% to 2.5%, while FactSet was expecting a 1.8%. rise.

Sankaran said the company has named Chief Operating Officer Susan Morris as its new CEO, effective May. 1, when Sankaran is set to retire.

"While fiscal 2025 will be an investment year, beginning in fiscal 2026 we expect to drive growth consistent with our long-term algorithm of 2+% identical sales and Adjusted EBITDA growth higher than identical sales growth," Morris said in prepared remarks.

Gross margin shrank to 27.4% in the quarter from 28% a year ago. That was due to the growth in pharmacy sales, which carry an overall lower gross margin rate, and increases in delivery and handling costs related to 24% growth in digital sales.

"We also made incremental investments in our customer value proposition which were funded by the benefits from our productivity initiatives, which included reductions in shrink expense," said the company.

The stock has gained 6.6% in the last 12 months, while the S&P 500 SPX has gained 6.8%.

-Ciara Linnane

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April 15, 2025 08:21 ET (12:21 GMT)

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