News

Albertsons Companies, Inc. ACI reported second-quarter fiscal 2024 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. While net sales increased, earnings decreased from the year-ago period.

We note that ACI remains focused on its "Customers for Life" strategy, which fueled growth in both digital sales and pharmacy operations. The company also achieved year-over-year increases in loyalty members and omnichannel shoppers, alongside accelerated growth in the Albertsons Media Collective.

Albertsons’ Q2 Performance in Detail

Albertsons, which entered into an “Agreement and Plan of Merger” with Kroger KR on Oct. 13, 2022, posted adjusted quarterly earnings of 51 cents per share, surpassing the Zacks Consensus Estimate of 48 cents. However, the bottom line declined 19% from 63 cents per share in the prior-year period.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Albertsons Companies, Inc. Price, Consensus and EPS Surprise

Albertsons Companies, Inc. price-consensus-eps-surprise-chart | Albertsons Companies, Inc. Quote

Net sales and other revenues of $18,551.5 million beat the Zacks Consensus Estimate of $18,451 million and rose 1.4% year over year. This was partly offset by lower fuel sales. The year-over-year increase in the top line stemmed from a 2.5% rise in identical sales, driven by strong growth in pharmacy sales. Digital sales rose 24% in the quarter under discussion.

The gross profit of $5.1 billion increased 1.6% year over year. However, the gross margin remained flat at 27.6%.

Excluding the impacts of fuel and LIFO expenses, the gross margin rate decreased 44 basis points (bps) year over year. This decline was primarily caused by robust growth in pharmacy operations, which generally have a lower gross margin rate. Gross margin was also affected by higher picking and delivery costs related to continued growth in digital sales. This was partly offset by procurement and sourcing productivity initiatives.

In the quarter, selling and administrative expenses jumped 4.1% to $4.8 billion and increased 70 bps to 25.8% as a percentage of net sales and other revenues. Excluding the impact of fuel, selling and administrative expense rate rose 41 bps year over year. This was caused by higher operating expenses related to digital and omnichannel development, ongoing merger-related costs, increased employee expenses, elevated business transformation costs and incremental third-party store security services costs. This was partly offset by the benefits of productivity initiatives.

Adjusted EBITDA declined 7.8% year over year to $900.6 million while adjusted EBITDA margin contracted 40 bps.

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Sneak Peek Into Albertsons’ Financial Details

Albertsons ended the quarter with cash and cash equivalents of $280 million. The company’s long-term debt and finance-lease obligations totaled $7.78 billion as of Sept. 7, 2024, while total stockholders' equity amounted to $3 billion.

Looking ahead into fiscal 2024, management foresees margin pressure amid a competitive environment. It anticipates headwinds related to investments in wages and benefits as well as a higher mix of pharmacy and digital businesses that usually carry lower margins. These are expected to be mitigated by productivity initiatives.

Shares of this Zacks Rank #3 (Hold) company have lost 8% in the past three months against the industry's growth of 4%.

Picks to Invest in

Here, we have highlighted two better-ranked stocks, namely, Costco Wholesale Corporation COST and Ollie's Bargain Outlet OLLI, currently carrying a Zacks Rank # 2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Costco offers branded and private-label products in a range of merchandise categories. COST has a trailing four-quarter average earnings surprise of 2%.

The Zacks Consensus Estimate for Costco’s current financial-year sales and earnings suggests growth of 7.4% and 10.1%, respectively, from the year-ago reported numbers.

Ollie's Bargain operates as a retailer of brand-name merchandise in the United States. OLLI has a trailing four-quarter earnings surprise of 7.9%, on average.

The Zacks Consensus Estimate for Ollie's Bargain’s current financial-year sales and earnings indicates a rise of around 8.8% and 12.7%, respectively, from the year-earlier levels.

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