Albertsons Companies Q2 Earnings Call Highlights

Key Points

• Second-quarter performance remained pressured: Identical sales fell 0.8%, adjusted EBITDA was $784 million, and adjusted EPS was $0.36. Core grocery sales declined by more than 1.5%, while e-commerce sales grew 11% and pharmacy sales rose in the low- to mid-single digits.
• Albertsons is accelerating its turnaround: The company plans to advance its ACI Edge program, pursue more than $2 billion in cost savings over three years, simplify operations, invest selectively in pricing, and potentially take headcount and inventory-related actions.
• A broad strategic review is underway: Management is evaluating banners, markets, stores and other assets, including possible exits from underperforming areas. It withheld updated guidance until the review is complete and expects to present a refreshed strategy and capital-allocation plan by the fourth-quarter earnings call.

Albertsons Companies NYSE: ACI reported a 0.8% decline in second-quarter identical sales and outlined a broader turnaround effort centered on cost reductions, targeted price investments, operational simplification and a review of its portfolio of businesses and assets.

Chief Executive Officer Susan Morris said the company saw “some early signs of improvement” during the quarter, including sequential improvement in core grocery identical sales versus the first quarter, but said those gains were not enough to offset pressure in the retail business. Albertsons reported adjusted EBITDA of $784 million and adjusted earnings per share of $0.36.

New Executive Chair Meg Whitman said Albertsons has strong local banners, valuable pharmacy and e-commerce operations, substantial cash flow and committed associates, but said its results have not matched the quality of its assets. “Sales and earnings growth have not met our expectations,” Whitman said, adding that market-share trends have lagged.

Whitman said the company is evaluating opportunities to improve operations, reduce costs, lower prices for customers, reset capital-allocation priorities and examine its portfolio of banners, markets, assets and businesses. “Everything should be on the table” as Albertsons considers how it should be structured to compete more effectively, she said.

Sales headwinds and digital growth

Albertsons said e-commerce sales rose 11% in the quarter, while digital penetration reached 10.5%. Pharmacy identical sales continued to grow, supported by prescription growth, although the business faced sales headwinds from the Inflation Reduction Act and an ongoing shift from branded drugs to generics.

Interim Chief Financial Officer Cody Perdue said the Inflation Reduction Act reduced total reported identical sales by about 120 basis points, while the brand-to-generic prescription mix shift created another 30-basis-point headwind. The company also cited a 30-basis-point impact from the Cyclospora outbreak, which broadly affected produce sales, and a 30-basis-point impact from egg deflation. Together, those factors represented approximately 210 basis points of pressure on reported identical sales.

Perdue said pharmacy identical sales increased in the low- to mid-single digits, while the core business declined by a little more than 1.5%. Management said the business’s performance at the end of the second quarter had not materially changed from its quarterly exit rate.

Morris said lower-income customers remain under pressure, trading down, seeking value and buying more private-label products. She said Albertsons does not intend to become the lowest-priced operator in each market, but plans to make selective pricing and promotional investments by market, category and item.

Cost reduction and ACI Edge acceleration

The company plans to accelerate its ACI Edge program, which began with the consolidation of 11 divisions into four regions and the centralization of center-store merchandising. Morris said centralized purchasing efforts, referred to as “Buying Better Together,” are already showing early signs of success and could generate more substantial benefits through the rest of the year and into next year.

Albertsons had previously increased its cost-savings target to $2 billion over the next three years, from $1.5 billion. Morris said management believes there is further opportunity to reduce costs at a faster pace.

Areas of focus include:

• Lowering costs for goods for resale through centralized buying and vendor negotiations.
• Reducing spending on goods not for resale by consolidating demand across the organization.
• Further reductions in selling, general and administrative expenses, including potential headcount actions.
• Improving inventory discipline and reducing shrink and waste in stores.
• Simplifying initiatives and decision-making to improve store execution and customer experience.

Morris acknowledged that the company had created complexity through too many initiatives and competing priorities. She said projects not directly tied to store standards, customer value or cost reduction could be paused or stopped.

Gross margin, excluding fuel and LIFO, was 26.8%, down 17 basis points year over year. Perdue said the decline reflected the mix effect of e-commerce growth and higher shrink, primarily related to the Cyclospora outbreak. Selling and administrative expense dollars were relatively flat from a year earlier, though the expense rate rose 38 basis points as lower sales reduced operating leverage.

Portfolio review, capital allocation and outlook

Management said it is conducting a disciplined review of its portfolio and will invest more aggressively in markets where it holds a leading position while considering exits from underperforming areas. Perdue said the company is evaluating both store performance and the capital required to maintain locations, but did not quantify the potential scale of portfolio actions.

Albertsons generated $1.2 billion of operating cash flow in the first half of fiscal 2026 and spent about $900 million on capital expenditures, including 38 remodels, seven new stores and continued digital and technology investments. Free cash flow exceeded $300 million, while net leverage ended the quarter at 2.4 times.

The company repurchased approximately $175 million of shares during the quarter and about $400 million in the first half. It had $1.7 billion remaining under its $2 billion repurchase authorization. Albertsons also paid an $0.17-per-share quarterly dividend, totaling $83 million, and declared another $0.17 dividend.

While Albertsons said second-quarter performance was in line with its revised expectations, management declined to provide an updated financial outlook. Perdue said the company wants to complete its comprehensive review before presenting a multi-year financial plan.

By its fourth-quarter earnings call, Albertsons expects to provide a refreshed customer strategy, expanded productivity and cost-reduction plans, pricing initiatives, portfolio optimization actions, a revised capital-allocation framework and measurable performance metrics. The company also plans to host an Investor Day in spring 2027.

About Albertsons Companies (NYSE:ACI)

Albertsons Companies, Inc is a U.S. food and drug retailer headquartered in Boise, Idaho. The company operates supermarkets, pharmacies and related retail businesses under banners including Albertsons, Safeway, Vons, Jewel-Osco, Shaw's, ACME, Tom Thumb, Randalls, United Supermarkets, Pavilions, Carrs and Haggen.

Its stores offer groceries, fresh produce, meat and seafood, bakery and deli items, household products, health and beauty products, and pharmacy services. Albertsons also provides private-label products, fuel at select locations, grocery delivery and pickup, digital shopping tools, and customer loyalty programs.

The company's history traces to 1939, when Joe Albertson opened the first Albertsons store in Boise.

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