Albertsons Earnings(NYSE:ACI) Loom Large: Stock Falling Into The Print

Albertsons Companies Inc. (NYSE: ACI) is gearing up to release its next earnings report tomorrow (Oct 14th), before the market open, setting the stage for a potentially pivotal moment for the grocery giant. The stock is currently priced at $17.04, down 7.36% in the last month.

Analysts expect ACI to report an average earnings per share (EPS) of $0.40 for the upcoming quarter, down from $0.51 in the same period last year, indicating a notable decline in profitability. Despite the expected drop in EPS, revenue is projected to reach $18.89 billion, reflecting a modest 1.83% year-over-year sales growth. This points to steady top-line performance, though rising costs and margin pressures may be weighing on the bottom line.

The shadow of the failed Kroger merger continues to loom large. After U.S. courts blocked the $25 billion deal in December 2024, citing antitrust concerns, Albertsons initiated a lawsuit against Kroger, alleging breach of contract and seeking significant damages, including a $600 million termination fee. Kroger has refuted these claims, setting the stage for a protracted legal battle. The outcome of this lawsuit could have significant financial implications for Albertsons, impacting its cash flow and future strategic options.

Recent financial performance offers a mixed bag. Albertsons' fiscal 2024 fourth-quarter earnings, reported in April, revealed revenue of $18.8 billion, slightly exceeding analyst expectations. However, earnings per share (EPS) of $0.29 fell short of the estimated $0.31. Net income also declined year-over-year, from $250.5 million to $172 million. On a positive note, identical sales grew by 2.3%, driven by strong pharmacy sales, and digital sales surged by 24%.

The first quarter of fiscal 2025 painted a slightly brighter picture. Albertsons reported a 2.8% increase in identical sales and a 25% jump in digital sales. Net income reached $236 million, or $0.41 per share. The company also raised its fiscal 2025 identical sales growth guidance to 2–2.75% and maintained its adjusted EPS guidance at $2.13–$2.16. The growth in their loyalty program, which expanded by 14% to reach 47.3 million members, is a clear signal that their efforts to build a strong customer base are paying off.

In a move signaling confidence in its financial position, Albertsons has been actively returning capital to shareholders. The company increased its quarterly dividend by 25% to $0.15 per share and authorized a $2 billion share repurchase program. During the first quarter of fiscal 2025, Albertsons repurchased 14.2 million shares of common stock for a total of $314.8 million.

While the market seems to be focused on the negative fallout from the failed Kroger merger, perhaps Albertsons is better off on its own. The company now has the opportunity to chart its own course, free from the constraints and potential integration challenges of a merger. The lawsuit against Kroger, while risky, could result in a substantial payout that would significantly bolster Albertsons' financial position.

Furthermore, the company's strong digital growth and loyalty program expansion suggest that it is well-positioned to compete in the evolving grocery landscape. It is possible that the market is underestimating Albertsons' ability to thrive independently and capitalize on its existing strengths. The freedom to innovate and adapt without the bureaucracy of a large merger could lead to a stronger, more agile Albertsons in the long run.

Looking ahead to the upcoming earnings report, the markets will be closely scrutinizing Albertsons' performance metrics, particularly its identical sales growth, digital sales trajectory, and progress in managing costs. Any updates on the Kroger lawsuit will also be closely watched. The company's guidance for the remainder of fiscal 2025 will be crucial in shaping market sentiment.

The grocery industry is fiercely competitive, with players like Walmart, Amazon, and regional chains vying for market share. Albertsons must continue to innovate and adapt to changing consumer preferences to maintain its competitive edge. This includes investing in its digital infrastructure, expanding its private-label offerings, and enhancing its customer loyalty programs.