Albertsons raises profit guidance after dropping Kroger deal
Albertsons Cos. raised its adjusted earnings outlook for the full year, a positive sign for the grocer seeking to pave a new path after its proposed deal with Kroger Co. fell apart.
The nation’s second-largest supermarket operator now expects adjusted earnings per share in the range of $2.25 to $2.31, up from as much as $2.30 previously.
Albertsons hosted a call with analysts Wednesday morning, the company’s first in more than two years when it agreed to combine with Kroger. That $24.6 billion deal ended late last year after a federal judge blocked it.
Shares rose 0.25% in trading Wednesday in New York. Albertsons stock fell 14% last year while the Russell 1000 index gained 24%.
The grocer is seeking growth as a standalone company at a time when price-sensitive consumers are prioritizing groceries and other necessities. Inflation has stabilized in recent months, but people’s budgets remain stretched.
“We are a stronger company today than pre-merger,” Chief Financial Officer Shannon McCollam said on a call with analysts. Albertsons has invested in its core business over the past two years and will continue to pursue growth initiatives such as automation and advertising to compete against better-performing retailers, executives said.
The company said it’s not having conversations with other bidders at this time and will focus on operating its business.
Adjusted EPS for the quarter ending Nov. 30 was 71 cents, higher than what Wall Street analysts were forecasting. Still, costs associated with online orders weighed on profit margins. The company’s comparable sales growth slightly missed expectations. Fuel sales weighed on operations, though pharmacy and digital fueled the rise.
Consumers continue to feel financial pressure, and Albertsons will seek to further cut prices on some products, Chief Executive Officer Vivek Sankaran said.
Albertsons announced a 25% raise to its quarterly dividend.
The Boise-based grocer runs over 2,200 stores across the U.S. under names like Safeway and Vons. After acquiring Safeway in 2015, it had tried to go public but canceled its plans twice before successfully doing so during the pandemic. Just about two years later, it agreed to be acquired by its bigger rival Kroger in October.
As a public company, Albertsons has been focusing on selling more fresh, higher-quality foods and centralizing how its divisions buy products. It’s remodeled stores, while growing its private-label business and investing in e-commerce. Sankaran previously said that if the Kroger deal fell through, he would need to make tough decisions that could include layoffs, store closures or seeking another acquisition partner.
Albertsons and Kroger said joining forces would help them compete better against Amazon.com Inc., Walmart Inc. and Costco Wholesale Corp., though the deal immediately drew opposition from elected officials and unions. The Federal Trade Commission later blocked the proposed tie-up, and a federal judge sided with regulators in December.
Albertsons has sued Kroger, claiming it failed to exercise best efforts to secure regulatory approval. It’s seeking billions of dollars in damages.