Albertsons Companies reported Oct. 13 that second quarter net income fell 69 percent to $51.5 million, or 11 cents per share, as identical sales declined 0.8 percent for the second straight quarter. The Boise, Idaho-based retailer also withdrew its fiscal 2026 outlook and said it is launching a comprehensive review of its cost structure, operating model, banner portfolio and capital allocation.
The results cover the 12 weeks ended Sept. 12. Albertsons said the quarter was in line with the reduced outlook it issued in July, when it announced the ACI Edge restructuring that consolidated 11 divisions into four regions and centralized center store merchandising. The company now says it will not provide updated guidance until the review is finished in the fourth quarter.
“Although our second quarter performance was in line with the expectations in our revised outlook, our results do not reflect the potential of the company,” said Susan Morris, CEO of Albertsons Cos. “We are launching a comprehensive business review to speed up improvements in Albertsons’ performance and tackle even harder a cost structure we can no longer afford.”
Morris said the review will look for ways to simplify the organization, improve decision-making and reinvest savings in customer value.
In her first earnings call since being named executive chair in September, Meg Whitman told investors the grocer’s performance “has fallen short” despite strong local banners, robust pharmacy and e-commerce businesses and substantial cash flow.
“We must also take a close look at our portfolio of banners, markets, assets, and businesses as well as at potential strategic actions we can take to enhance shareholder value,” Whitman said. “Susan and I agree that everything should be on the table as we figure out how Albertsons should be structured to better compete in the years ahead. Albertsons must become a simpler, more focused company that gets the basics right every day.”
Sales and margins
Net sales and other revenue slipped 0.1 percent to $18.89 billion from $18.92 billion a year earlier. The identical sales decline was partly offset by higher fuel sales. Digital sales grew 11 percent, down from 13 percent growth in the first quarter, and pharmacy sales continued to grow despite ongoing headwinds from the Inflation Reduction Act.
Gross margin rate fell to 26.8 percent from 27 percent. Excluding fuel and LIFO expense, the rate was down 17 basis points, which Albertsons attributed to higher delivery and handling costs tied to digital growth and higher shrink. Pharmacy margins improved, and the company said it continued to fund investments in price and value through productivity initiatives.
Selling and administrative expenses rose to 25.6 percent of revenue from 25.4 percent, driven by sales deleveraging. Dollar expenses were roughly flat, with cost controls offsetting inflation and higher litigation costs related to the terminated Kroger merger.
Charges weigh on the bottom line
Several items pushed net income lower. The company recorded $42.4 million in property disposition and impairment losses, up from $4.4 million a year ago, mostly from store impairments and equipment disposals. Interest expense rose to $125 million from $105.3 million on higher borrowings.
Adjusted net income was $179 million, or 36 cents per share, down from $248.4 million, or 44 cents, a year earlier. Adjusted EBITDA fell 7.6 percent to $784 million, or 4.1 percent of revenue, compared with $848.4 million, or 4.5 percent, in the prior-year quarter. The company’s net debt ratio climbed to 2.42 from 2.02.
Capital spending and buybacks
Through the first 28 weeks of fiscal 2026, Albertsons spent $899.6 million on capital projects, completing 38 remodels and opening seven new stores. The company repurchased 26 million shares for $387.6 million during the period and declared a quarterly dividend of 17 cents per share, payable Nov. 6.
Albertsons said it expects to deliver a refreshed financial framework alongside its turnaround plan on its fourth quarter earnings call and plans to hold an investor day in spring 2027. Cody Perdue is serving as interim CFO following the retirement of Sharon McCollam.
As of Sept. 12, Albertsons operated 2,240 stores in 35 states and the District of Columbia, down from 2,257 a year earlier, under 22 banners including Albertsons, Safeway, Vons, Jewel-Osco, Shaw’s, ACME, Tom Thumb and Randalls.