Albertsons Companies(ACI) - 2026 Q2 - Quarterly Results

Executive Summary and Business Highlights Albertsons Companies reported solid Q2 Fiscal 2025 results with strong digital sales and loyalty growth, alongside a $750 million share repurchase and increased fiscal 2025 Adjusted EPS outlook Second Quarter Fiscal 2025 Highlights Albertsons Companies reported solid operating and financial results for Q2 Fiscal 2025, driven by strong performance in digital sales, pharmacy, and loyalty membership, also announcing a $750 million accelerated share repurchase and increased fiscal 2025 Adjusted EPS outlook - The company delivered solid operating and financial results, investing in its core business and enhancing customer experience, leading to strong growth in digital sales, pharmacy, and loyalty membership[4] Q2 Fiscal 2025 Key Metrics | Metric | Q2 Fiscal 2025 | | :----- | :------------- | | Identical sales (adjusted) | +2.2% | | Digital sales | +23% | | Loyalty members | 48.7 million | | Net income (million USD) | $169 | | Net income per share (USD) | $0.30 | | Adjusted net income (million USD) | $248 | | Adjusted net income per share (USD) | $0.44 | | Adjusted EBITDA (million USD) | $848 | CEO Commentary CEO Susan Morris highlighted strong performance against strategic priorities, fueling deeper engagement across digital platforms and outsized growth in digital sales, pharmacy, and loyalty, emphasizing ongoing productivity initiatives offsetting inflation and funding investments, and announcing a $750 million accelerated share repurchase as a commitment to shareholder returns and confidence in business value - CEO Susan Morris noted strong performance in strategic priorities, driving digital sales, pharmacy, and loyalty membership growth, while productivity initiatives offset inflation and funded customer-focused investments[4] - The company is investing with purpose, modernizing capabilities through scalable technology, and advancing productivity initiatives to fuel long-term growth[4] - A $750 million accelerated share repurchase agreement was announced, underscoring conviction in business value and commitment to delivering shareholder returns[4] Second Quarter Fiscal 2025 Financial Performance Net sales increased by 2.0% driven by identical sales and pharmacy, while gross margin declined due to pharmacy mix and digital costs, and adjusted profitability metrics decreased Net Sales and Other Revenue Analysis Net sales and other revenue increased by 2.0% year-over-year, primarily driven by a 2.2% increase in identical sales, with strong pharmacy sales and a 23% rise in digital sales, partially offset by lower fuel sales Net Sales and Other Revenue | Metric | Q2 Fiscal 2025 (million USD) | Q2 Fiscal 2024 (million USD) | YoY Change | | :----- | :------------- | :------------- | :--------- | | Net sales and other revenue | $18,915.8 | $18,551.5 | +2.0% | | Identical sales (adjusted) | +2.2% | N/A | Up | | Digital sales | +23% | N/A | Up | - Strong growth in pharmacy sales was the primary driver of the identical sales increase[5] - Increases in Net sales and other revenue were partially offset by lower fuel sales[5] Gross Margin Analysis The gross margin rate decreased to 27.0% from 27.6% year-over-year, with the rate excluding fuel and LIFO expense decreasing by 63 basis points, mainly due to strong growth in lower-margin pharmacy sales and increased delivery and handling costs from digital sales growth, with investments in customer value funded by productivity initiatives Gross Margin Rate | Metric | Q2 Fiscal 2025 | Q2 Fiscal 2024 | Change | | :----- | :------------- | :------------- | :----- | | Gross margin rate | 27.0% | 27.6% | -0.6% | | Gross margin rate (excl. fuel & LIFO) | N/A | N/A | -63 bps | - The decrease in gross margin rate was driven by strong growth in pharmacy sales, which carries an overall lower gross margin rate, and increases in delivery and handling costs related to digital sales growth[6][8] - Incremental investments in the customer value proposition were funded by benefits from productivity initiatives[8] Selling and Administrative Expenses Analysis Selling and administrative expenses decreased to 25.4% of Net sales and other revenue from 25.8% year-over-year, with the percentage excluding fuel decreasing by 50 basis points, primarily due to leveraging employee costs and lower merger-related costs, partially offset by increased business transformation costs, while productivity initiatives continued to mitigate rising wage rates and inflationary pressures Selling and Administrative Expenses | Metric | Q2 Fiscal 2025 | Q2 Fiscal 2024 | Change | | :----- | :------------- | :------------- | :----- | | S&A expenses as % of Net sales | 25.4% | 25.8% | -0.4% | | S&A expenses as % of Net sales (excl. fuel) | N/A | N/A | -50 bps | - The decrease in Selling and administrative expenses as a percentage of Net sales was primarily attributable to the leveraging of employee costs and lower merger-related costs, partially offset by increases in business transformation costs[9] - Benefits from productivity initiatives continue to help offset increasing wage rates and other inflationary pressures on operating expenses[9] Other Income/Expense and Tax Impact Net loss on property dispositions and impairment losses significantly decreased to $4.4 million from $43.9 million year-over-year, with the company also reporting a shift from other expense, net of $1.9 million to other income, net of $29.7 million, and income tax expense increasing to $51.2 million with an effective tax rate of 23.3% Other Income/Expense and Tax Impact | Metric | Q2 Fiscal 2025 (million USD) | Q2 Fiscal 2024 (million USD) | Change (million USD) | | :----- | :------------- | :------------- | :--------- | | Net loss on property dispositions and impairment losses | $4.4 | $43.9 | -$39.5 | | Interest expense, net | $105.3 | $103.6 | +$1.7 | | Other income (expense), net | $29.7 (income) | $1.9 (expense) | Shift to income | | Income tax expense | $51.2 | $41.0 | +$10.2 | | Effective tax rate | 23.3% | 22.0% | +1.3% | - The net loss on impairment during the second quarter of fiscal 2024 was primarily due to impairment losses related to equipment from closing micro-fulfillment centers and retail store impairment losses, partially offset by gains from the sale of real estate assets[10] Net Income and Adjusted Profitability Metrics Net income increased to $168.5 million, or $0.30 per share, from $145.5 million, or $0.25 per share, year-over-year, while Adjusted net income decreased to $248.4 million, or $0.44 per share, from $301.0 million, or $0.51 per share, and Adjusted EBITDA also saw a decline to $848.4 million, or 4.5% of Net sales, from $900.6 million, or 4.9% Net Income and Adjusted Profitability | Metric | Q2 Fiscal 2025 | Q2 Fiscal 2024 | YoY Change | | :----- | :------------- | :------------- | :--------- | | Net income (million USD) | $168.5 | $145.5 | +$23.0 | | Net income per share (USD) | $0.30 | $0.25 | +$0.05 | | Adjusted net income (million USD) | $248.4 | $301.0 | -$52.6 | | Adjusted net income per share (USD) | $0.44 | $0.51 | -$0.07 | | Adjusted EBITDA (million USD) | $848.4 | $900.6 | -$52.2 | | Adjusted EBITDA as % of Net sales | 4.5% | 4.9% | -0.4% | Capital Allocation and Shareholder Returns During the first 28 weeks of fiscal 2025, capital expenditures totaled $950.5 million, focusing on remodels, new stores, and digital/technology platforms, with the company paying a quarterly dividend of $0.15 per share and repurchasing 25.7 million shares for $550.1 million, and post-quarter, Albertsons entered a $750 million accelerated share repurchase agreement and increased its total share repurchase authorization to $2.75 billion Capital Allocation Metrics | Metric | First 28 Weeks Fiscal 2025 | | :----- | :------------------------- | | Capital expenditures (million USD) | $950.5 | | Remodels completed | 51 | | New stores opened | 3 | | Quarterly dividend per share (USD) | $0.15 | | Shares repurchased (million) | 25.7 | | Cost of shares repurchased (million USD) | $550.1 | - The company entered into a $750 million accelerated share repurchase agreement and increased its total share repurchase program authorization from $2.0 billion to $2.75 billion[16] - Capital expenditures primarily included continued investment in digital and technology platforms[14] Fiscal Year 2025 Outlook Albertsons Companies updated its fiscal 2025 outlook, increasing the expected identical sales growth range and Adjusted net income per Class A common share, while Adjusted EBITDA, effective income tax rate, and capital expenditures ranges were also provided, with some remaining unchanged Fiscal 2025 Outlook | Metric | Updated Fiscal 2025 Outlook | Previous Outlook | Change | | :----- | :-------------------------- | :--------------- | :----- | | Identical sales growth | 2.2% to 2.75% | 2.0% to 2.75% | Increased lower bound | | Adjusted EBITDA (billion USD) | $3.8 to $3.9 | Unchanged | | | Adjusted net income per Class A common share (USD) | $2.06 to $2.19 | $2.03 to $2.16 | Increased lower and upper bounds | | Effective income tax rate | 23.5% to 24.5% | Unchanged | | | Capital expenditures (billion USD) | $1.8 to $1.9 | $1.7 to $1.9 | Increased lower bound | - The company is unable to provide a full reconciliation of GAAP and Non-GAAP Measures for the updated fiscal 2025 outlook without unreasonable effort due to the unpredictability of certain adjustment items[17] Company Overview and Disclosures This section provides conference call details, an overview of Albertsons Companies' extensive retail operations and community contributions, and outlines key forward-looking statements and associated risk factors Conference Call Information Albertsons Companies held a conference call on October 14, 2025, at 8:30 a.m. Eastern Time, hosted by CEO Susan Morris and President & CFO Sharon McCollam, with a webcast replay available for at least two weeks on the investor relations website - A conference call was held on October 14, 2025, at 8:30 a.m. ET, hosted by the CEO and President & CFO, with a webcast replay available on the company's investor relations website[18] About Albertsons Companies Albertsons Companies is a leading US food and drug retailer, operating 2,257 retail stores, 1,720 in-store pharmacies, 405 fuel centers, 22 distribution centers, and 19 manufacturing facilities across 35 states and D.C. under 22 banners, and in 2024, the company contributed over $435 million in food and financial support, including $40 million through its Nourishing Neighbors Program Company Operational Footprint | Metric | Count (as of Sep 6, 2025) | | :----- | :------------------------ | | Retail stores | 2,257 | | In-store pharmacies | 1,720 | | Associated fuel centers | 405 | | Dedicated distribution centers | 22 | | Manufacturing facilities | 19 | | States of operation | 35 + D.C. | | Banners | 22 | - In 2024, the company, along with the Albertsons Companies Foundation, contributed over $435 million in food and financial support, including more than $40 million through its Nourishing Neighbors Program[19] Forward-Looking Statements and Risk Factors This section defines forward-looking statements and outlines numerous risks and uncertainties that could cause actual results to differ materially from projections, with key risks including macroeconomic conditions, consumer behavior, wage rates, supply chain challenges, cyber incidents, and litigation related to the terminated merger agreement with Kroger - Forward-looking statements are identified by specific words and expressions, are not guarantees of future performance, and are subject to numerous risks and uncertainties beyond the company's control[21][23][24] - Key risks include changes in macroeconomic conditions, consumer behavior, wage rates, geopolitical uncertainty, inability to execute standalone business strategies following the termination of the merger agreement with Kroger, and ongoing litigation costs[24][26] - Other risks involve challenges with the supply chain, operational and financial effects from cyber incidents, and changes in tax rates, laws, and regulations[26] Non-GAAP Measures and Identical Sales Definitions This section defines Non-GAAP Measures (EBITDA, Adjusted EBITDA, Adjusted net income, Adjusted net income per Class A common share, and Net debt ratio) as supplemental performance indicators used by management, analysts, and investors to evaluate ongoing operations by excluding non-core items, and also defines 'identical sales' as sales from stores operating in both current and prior fiscal years, including direct-to-consumer digital sales but excluding fuel sales - Non-GAAP Measures are performance measures providing supplemental information useful for evaluating ongoing results by excluding items management does not consider in assessing core operating performance[27] - Identical sales include stores operating during the same period in both current and prior fiscal years, direct-to-consumer digital sales, and exclude fuel sales[28] Condensed Consolidated Financial Statements This section presents the Condensed Consolidated Statements of Operations, Balance Sheets, and Cash Flows, detailing the company's financial performance, position, and liquidity for the reported periods Condensed Consolidated Statements of Operations The Condensed Consolidated Statements of Operations show a 2.0% increase in Net sales and other revenue for the 12 weeks ended September 6, 2025, reaching $18,915.8 million, with gross margin slightly decreasing to 27.0%, while selling and administrative expenses as a percentage of revenue also decreased to 25.4%, and net income for the quarter was $168.5 million, or $0.30 per diluted share Condensed Consolidated Statements of Operations | Metric (12 weeks ended) | Sep 6, 2025 (million USD) | Sep 7, 2024 (million USD) | | :---------------------- | :---------- | :---------- | | Net sales and other revenue | $18,915.8 | $18,551.5 | | Gross margin | $5,106.6 | $5,121.3 | | Selling and administrative expenses | $4,806.9 | $4,785.4 | | Operating income | $295.3 | $292.0 | | Net income | $168.5 | $145.5 | | Diluted net income per Class A common share (USD) | $0.30 | $0.25 | | Gross margin % | 27.0% | 27.6% | | S&A expenses % | 25.4% | 25.8% | | Number of stores at end of quarter | 2,257 | 2,267 | Condensed Consolidated Balance Sheets As of September 6, 2025, total assets were $26,850.5 million, a slight increase from $26,755.7 million at February 22, 2025, with current assets increasing primarily driven by receivables and inventories, total current liabilities significantly increasing to $8,416.7 million from $7,251.0 million, mainly due to a rise in current maturities of long-term debt and finance lease obligations, and total stockholders' equity decreasing to $3,079.5 million from $3,385.9 million Condensed Consolidated Balance Sheets | Metric (as of) | Sep 6, 2025 (million USD) | Feb 22, 2025 (million USD) | | :------------- | :---------- | :----------- | | Total current assets | $6,852.6 | $6,559.0 | | Total assets | $26,850.5 | $26,755.7 | | Total current liabilities | $8,416.7 | $7,251.0 | | Long-term debt and finance lease obligations | $6,940.1 | $7,762.5 | | Total stockholders' equity | $3,079.5 | $3,385.9 | - Current maturities of long-term debt and finance lease obligations increased significantly from $57.6 million at February 22, 2025, to $1,186.4 million at September 6, 2025[33] Condensed Consolidated Statements of Cash Flows For the 28 weeks ended September 6, 2025, net cash provided by operating activities was $1,282.0 million, a decrease from $1,374.1 million in the prior year, net cash used in investing activities decreased to $837.9 million, while net cash used in financing activities increased to $467.0 million, largely due to increased payments on long-term borrowings and treasury stock purchases Condensed Consolidated Statements of Cash Flows | Metric (28 weeks ended) | Sep 6, 2025 (million USD) | Sep 7, 2024 (million USD) | | :---------------------- | :---------- | :---------- | | Net cash provided by operating activities | $1,282.0 | $1,374.1 | | Net cash used in investing activities | $837.9 | $925.3 | | Net cash used in financing activities | $467.0 | $357.8 | | Net (decrease) increase in cash and cash equivalents | ($22.9) | $91.0 | | Cash and cash equivalents at end of period | $275.0 | $284.2 | - Payments on long-term borrowings increased to $600.3 million from $200.4 million, and treasury stock purchases amounted to $550.1 million in the current period[35] Reconciliation of Non-GAAP Financial Measures This section provides detailed reconciliations of Net income to Adjusted net income and Adjusted EBITDA, diluted EPS to Adjusted EPS, and classifications of Non-GAAP adjustments, including depreciation, miscellaneous items, and the Net debt ratio Net Income to Adjusted Net Income and Adjusted EBITDA Reconciliation This section provides a reconciliation from Net income to Adjusted net income and Adjusted EBITDA for both the 12-week and 28-week periods, with key adjustments including business transformation costs, equity-based compensation, LIFO expense, merger-related costs, and the tax impact of these adjustments, and for the 12 weeks ended September 6, 2025, Adjusted net income was $248.4 million and Adjusted EBITDA was $848.4 million Net Income to Adjusted Net Income and Adjusted EBITDA | Metric (12 weeks ended) | Sep 6, 2025 (million USD) | Sep 7, 2024 (million USD) | | :---------------------- | :---------- | :---------- | | Net income | $168.5 | $145.5 | | Business transformation | $35.3 | $20.5 | | Equity-based compensation expense | $18.7 | $29.5 | | Merger-related costs | $19.0 | $67.4 | | Tax impact of adjustments | ($25.1) | ($47.8) | | Adjusted net income | $248.4 | $301.0 | | Adjusted EBITDA | $848.4 | $900.6 | - Merger-related costs for the 12 weeks ended September 6, 2025, primarily relate to litigation costs and retention program expense related to the terminated merger[40] Diluted Net Income per Share to Adjusted Net Income per Share Reconciliation This reconciliation details the adjustments from diluted net income per Class A common share to Adjusted net income per Class A common share, with diluted net income per share for the 12 weeks ended September 6, 2025, at $0.30, and after Non-GAAP adjustments and restricted stock units, Adjusted net income per share at $0.44 Diluted Net Income per Share to Adjusted Net Income per Share | Metric (12 weeks ended) | Sep 6, 2025 (USD) | Sep 7, 2024 (USD) | | :---------------------- | :---------- | :---------- | | Diluted net income per Class A common share | $0.30 | $0.25 | | Non-GAAP adjustments | $0.14 | $0.27 | | Restricted stock units | $0.00 | ($0.01) | | Adjusted net income per Class A common share - diluted | $0.44 | $0.51 | - Adjusted weighted average Class A common shares outstanding (diluted) for the 12 weeks ended September 6, 2025, was 570.3 million, compared to 591.2 million in the prior year[39] Non-GAAP Adjustment Classifications This section classifies various Non-GAAP adjustments within the Condensed Consolidated Statements of Operations, indicating their impact on Cost of sales, Selling and administrative expenses, Interest expense, net, Depreciation and amortization, or Other (income) expense, net, with footnotes providing further detail on the nature of these adjustments, such as business transformation costs, merger-related costs, and miscellaneous adjustments - Business transformation adjustments primarily include costs associated with third-party consulting fees related to the Customers for Life strategy and employee terminations[40] - Merger-related costs for the current period primarily relate to litigation costs and retention program expense due to the terminated merger[40] - Miscellaneous adjustments include pension settlement gains and losses, net realized and unrealized gains and losses related to non-operating investments, adjustments for closed stores and surplus properties, non-cash rent expense, and gains and losses on energy hedges[40] Reconciliation of Depreciation and Amortization This table breaks down total depreciation and amortization into amounts impacting Cost of sales and Selling and administrative expenses for both the 12-week and 28-week periods, with total depreciation and amortization for the 12 weeks ended September 6, 2025, at $434.7 million, including $45.2 million in Cost of sales and $389.5 million in Selling and administrative expenses Reconciliation of Depreciation and Amortization | Metric (12 weeks ended) | Sep 6, 2025 (million USD) | Sep 7, 2024 (million USD) | | :---------------------- | :---------- | :---------- | | Cost of sales | $45.2 | $41.8 | | Selling and administrative expenses | $389.5 | $380.1 | | Total Depreciation and amortization | $434.7 | $421.9 | Reconciliation of Miscellaneous Adjustments This table details the classification of miscellaneous adjustments across Cost of sales, Selling and administrative expenses, and Other (income) expense, net, with total miscellaneous adjustments for the 12 weeks ended September 6, 2025, resulting in a net income of ($8.1 million), primarily driven by ($26.0 million) in Other (income) expense, net Reconciliation of Miscellaneous Adjustments | Metric (12 weeks ended) | Sep 6, 2025 (million USD) | Sep 7, 2024 (million USD) | | :---------------------- | :---------- | :---------- | | Cost of sales | $0.2 | $2.3 | | Selling and administrative expenses | $17.7 | $12.1 | | Other (income) expense, net | ($26.0) | ($0.6) | | Total Miscellaneous adjustments | ($8.1) | $13.8 | Reconciliation of Net Debt Ratio and Rolling Four Quarters Adjusted EBITDA This section provides a reconciliation of the Net debt ratio and rolling four quarters Adjusted EBITDA, with the Net debt ratio as of September 6, 2025, at 2.02, based on total debt net of cash and cash equivalents of $7,855.9 million and rolling four quarters Adjusted EBITDA of $3,879.6 million, which decreased from $4,106.8 million in the prior year Reconciliation of Net Debt Ratio and Rolling Four Quarters Adjusted EBITDA | Metric (as of) | Sep 6, 2025 (million USD) | Sep 7, 2024 (million USD) | | :------------- | :---------- | :---------- | | Total debt (incl. finance leases) | $8,126.5 | $7,908.4 | | Cash and cash equivalents | $270.6 | $280.0 | | Total debt net of cash and cash equivalents | $7,855.9 | $7,628.4 | | Rolling four quarters Adjusted EBITDA | $3,879.6 | $4,106.8 | | Total Net debt ratio | 2.02 | 1.86 | - Rolling four quarters Adjusted EBITDA decreased from $4,106.8 million to $3,879.6 million year-over-year[45] - Adjustments to EBITDA for the rolling four quarters include business transformation ($141.0 million), equity-based compensation expense ($92.4 million), and merger-related costs ($133.1 million)[45]