Albertsons Companies, Inc. ((ACI)) has held its Q4 earnings call. Read on for the main highlights of the call.
Albertsons Companies, Inc. recently held its earnings call, revealing a mixed sentiment among stakeholders. While the company celebrated robust growth in its E-commerce and loyalty programs, as well as increased pharmacy revenue and productivity savings, it also faced challenges such as gross margin pressure, declining adjusted EBITDA and EPS, and inflationary headwinds.
Strong E-commerce and Loyalty Growth
Albertsons reported a remarkable 24% growth in E-commerce for both the fourth quarter and the full year, with first-party sales significantly outpacing third-party growth. Additionally, the company’s loyalty membership saw a substantial increase of over 15% year-over-year, reaching more than 45 million members.
Pharmacy Revenue Increase
The company’s pharmacy revenue experienced an 18% year-over-year increase, driven by industry-leading script and immunization growth. Albertsons also boasted best-in-class customer satisfaction scores, further solidifying its position in the pharmacy sector.
Productivity and Cost Savings
Albertsons outlined its plan to deliver $1.5 billion in productivity savings from fiscal year 2025 through 2027. These savings are intended to be reinvested in growth initiatives and customer value propositions, aiming to enhance the company’s competitive edge.
Albertsons Media Collective (AMC) Expansion
The company is investing significantly in the Albertsons Media Collective, expecting it to grow faster than the retail media market. These investments are aimed at improving both endemic and non-endemic brand reach.
Capital Allocation and Shareholder Returns
Albertsons demonstrated its commitment to shareholder returns by distributing approximately $87 million through dividends and repurchasing $83 million of common stock in Q4 2024. The company plans to complete a $2 billion share repurchase program over the next three years.
Gross Margin and SG&A Pressure
The company faced a 45 basis point decrease in gross margin, attributed to strong growth in pharmacy sales and increased digital volume-related delivery costs. SG&A expenses also rose due to business transformation costs.
Adjusted EBITDA and EPS Decline
Albertsons reported a decline in Q4 2024 adjusted EBITDA, which was $855 million compared to $916 million last year. Adjusted EPS also fell to $0.46 from $0.54 in the fourth quarter of 2023.
Inflationary Headwinds and Consumer Behavior
Inflationary pressures have heightened customer needs for value, prompting a shift towards value and promotional items. SNAP customers are particularly feeling the pressure, influencing consumer behavior.
Tariffs and Cost of Goods Concerns
The potential impact of tariffs remains a concern for Albertsons, as the company sources more than 90% of its products domestically. However, ingredient sourcing from tariff-impacted areas could affect costs.
Forward-Looking Guidance
Looking ahead to fiscal year 2025, Albertsons projects identical sales growth between 1.5% and 2.5%, with inflation assumptions of 1.5% to 2%. The company expects adjusted EBITDA to range from $3.8 billion to $3.9 billion, factoring in a $65 million contribution from the fiscal year’s 53rd week. Adjusted EPS is anticipated to be between $2.03 and $2.16. Capital expenditures are forecasted between $1.7 billion and $1.9 billion. Albertsons aims to achieve $1.5 billion in productivity savings from fiscal 2025 through 2027, reinvesting these savings into growth initiatives and offsetting inflationary pressures.
In conclusion, Albertsons Companies, Inc. presented a mixed outlook during its earnings call, with notable achievements in E-commerce and pharmacy growth counterbalanced by challenges in gross margin and adjusted earnings. The company’s forward-looking guidance reflects cautious optimism, with strategic investments planned to bolster growth and shareholder value.