In an April 22nd 2024 release, Albertson’s Companies (ACI) posted financial results for the 4th quarter and fiscal 2023 ending February 24th 2024. Earnings were consistent with expectations but sales were lower than consensus estimates. As the second largest pure-grocery company, Albertson’s can be regarded as a bellwether for the retail food industry, subject to increased costs of foods, labor, and transport in a competitive consumer environment impacted by inflation as reflected in low net margins among competitors.
Albertsons operates 2,270 stores under 21 banners including Albertson’s, Safeway, Von’s, Acme, Jewel-Osco and Shaw’s. Albertson’s Companies posted a 1.0 percent increase in same-store sales during the most recent quarter with a 24 percent increase in digital sales over the corresponding Q4 of FY 2022. Loyalty membership increased 16 percent to 39.8 million.
For Q4 net income was $280.5 million on total revenue of $18,340 million. Comparable figures for the fourth quarter of fiscal 2022 ending February 25th 2023 were net income of $311.1 million on total revenue of $18,265 million. Diluted EPS for Class A shares for the most recent quarter was $0.43 down from $0.54 for Q4 FY 2022. Gross margin increased fractionally from 27.8 percent to 28.0 percent denoting minor reduction in cost of goods sold reflecting deflation. Operating income decreased from 2.4 percent in Q4 FY 2022 to 2.3 percent. During Q4 FY 2022 Albertsons recorded a $61.4 million gain on property disposition and $9.5 million assigned to the ‘other income’ category.
For FY 2023 net income was $1,296 million on total revenue of $79,238 million with a diluted EPS of $2.23. Comparable figures for fiscal 2022 ending February 26th 2023 were net income of $1,514 million on total revenue of $77,650 million with a diluted EPS of $2.27
In commenting on results CEO Vivek Sankaran stated, “We delivered another solid quarter amidst a difficult industry backdrop. Again during this quarter, we focused on our strategy to create Customers for Life, which drove strong growth in digital and pharmacy, deepened our omnichannel relationships with our customers and improved our in-store experience”.
Sankaran concluded, "We expect to face ongoing headwinds posed by investments in associate wages and benefits, cycling significant prior year food inflation, lower government assistance for our customers, declining COVID-related income, and the increasing mix of our pharmacy and digital businesses, which carry lower margins. We expect these headwinds to be much stronger in the first half of fiscal 2024. These headwinds are expected, to be partially offset by ongoing productivity initiatives."
On Friday October 14th 2022 Kroger announced a bid for Albertson’s offering $34 per share and assuming $4.7 billion in debt in a $25 billion transaction. The acquisition would at the least have required divestment of stores among in areas with an overlap. Several U.S. senators, states Attorneys General and unions representing Albertson’s workers oppose the transaction. The parties to the merger offered to spin off 413 stores and eight DCs to C&S Wholesalers, since increased by an additional 166 stores. The combined company would invest in worker benefits, devote $1 billion of working capital to reduce prices and would recognize unions.
On January 15th in advance of a Federal Trade Commission decision, the parties issued a joint statement “We remain in active and ongoing dialogue with the FTC and individual state Attorneys General regarding our proposed merger and divestiture plan. We believe our merger with Albertsons and the comprehensive divestiture to C&S will result in the best outcomes for customers, associates and our communities”.
The FTC sued to block the merger in mid-February 2024 supported by eight states and Washington DC. with a hearing to commence on August 12th 2024.
Albertson’s Corporation posted assets of $26,221 million including $3,636 million in goodwill and intangibles, against long-term debt and lease obligations of $15,207 million. The Company had an intraday market capitalization of $11,630 million on April 23rd 2014. ACI trades with a forward P/E of 7.8 and has ranged over a 52-week period from $19.88 to $23.88 with a 50-day moving average of $20.89. Approximately 74 percent of equity is held by institutions with 14 percent by insiders. The Company attained a 12-month trailing operating margin of 2.7 percent and a profit margin of 1.6 percent. Return on assets was 5.6 percent and 58.9 percent on equity.