Albertsons plunges after slashing guidance; Kroger also lower

Albertsons Companies (ACI) fell sharply in early trading on Thursday after the grocery store operator lowered its full-year profit outlook.

The company reported revenue increased 0.2% in its fiscal first quarter that ended on June 20 to $24.9B. The increase was driven by higher fuel sales, as identical sales declined 0.8% during the quarter. Pharmacy and digital remained areas of strength, with pharmacy sales continuing to grow despite ongoing Inflation Reduction Act headwinds and digital sales increasing 13% during the quarter. 

On the margin front, Albertsons (ACI) gross margin rate decreased 50 basis points from a year ago to 26.6% of sales. Excluding the impact of fuel and LIFO expense, the gross margin rate decreased 23 basis points, primarily due to increases in delivery and handling costs related to the continued growth in digital sales, as well as higher fuel costs. Those impacts were partially offset by improvements in pharmacy margins, primarily related to the impact of the IRA. Adjusted EBITDA was $1.01B in FQ1 vs. $1.11B a year ago.

"While these results did not meet our expectations, they underscored the need to move faster," highlighted CEO Susan Morris. "We are accelerating change to strengthen our competitiveness and improve execution across the business," she added. "Given continued softness in industry unit trends and a more cautious consumer, we are accelerating investments and operational changes designed to strengthen our customer value proposition and improve our competitive position," updated Morris.

Looking ahead, Albertsons (ACI) lowered its full-year EPS outlook to a range of $1.75 to $1.85 vs. the prior expectation for $2.22 to $2.32 and the consensus estimate of $2.27.

Shares of Albertsons (ACI) plunged 19.5% in premarket trading to a multi-year low. Grocery peer Kroger (KR) was down 2.8%.