Albertsons records robust Q1 but outlines challenges on the horizon

Dive Brief:

Albertsons on Tuesday posted results for its first quarter of 2023 that beat Wall Street estimates, with net sales and other revenue that rose 3.4% year-over-year, to $24.1 billion.
Identical sales were up 4.9% during Q1 compared with the same period a year ago, but net income fell to $417 million, a 13.8% year-over-year decline.
Albertsons is relying on its productivity initiatives to help partially offset expected headwinds of ongoing labor investment, cost increases and a huge drop in COVID-19 vaccination and test kit revenue, CEO Vivek Sankaran said in a statement.

Dive Insight:

Albertsons attributed its net sales and revenue boost, which was partially offset by lower fuel sales, to its identical sales increase driven by price inflation across most categories, pharmacy growth and increasing digital penetration.

However, the Sankaran said that the grocery company is “mindful of the evolving economic backdrop, including slowing food inflation, declining government assistance and higher interest rates, and their potential effects on consumer spending and our business.”

Albertsons, which did not hold an earnings call Tuesday in light of its planned merger with Kroger, said that its productivity initiatives are paying off, allowing the grocer to provide incremental price investments to its customers during Q1.

During Q1, Albertsons finished 43 remodels and opened two new stores.

The grocer recorded another quarter of e-commerce sales growth, with digital sales up 22% year-over-year in Q1, which ended June 17. The grocer also saw its loyalty members increase 16% to 35.9 million.

Adjusted EBITDA was $1.3 million in Q1, down from the $1.4 million recorded during the same period a year ago. Albertsons said that decrease was mainly due to fewer COVID vaccinations and a year-over-year drop in gross margin rate.

The grocer said it expects to see COVID vaccinations and at-home test kit demand continue to dwindle, which will cause an estimated $130 million headwind to adjusted EBITDA for the remaining three quarters of fiscal year 2023.