Albertsons Companies, Inc. (NYSE:ACI) reported second-quarter fiscal 2026 adjusted earnings above analyst expectations, although declining comparable sales and weaker profitability prompted the US grocery retailer to withdraw its full-year financial outlook.
The company posted adjusted earnings per share of $0.36, exceeding the consensus estimate of $0.33 by $0.03. Revenue totalled $18.89 billion, matching market forecasts but slipping 0.1% from $18.92 billion in the corresponding period last year.
Albertsons shares declined 1.12% in pre-market trading following the announcement.
The retailer also announced a comprehensive business review aimed at improving operating performance, reducing costs and reassessing its business structure.
Chief Executive Officer Susan Morris said the review is intended to accelerate improvements and address a cost base that management considers unsustainable.
Albertsons reported adjusted earnings per share of $0.36 for the second quarter, ahead of analyst expectations of $0.33.
However, the company’s underlying profitability weakened compared with the previous year.
Net income fell to $52 million, or $0.11 per share, from $169 million, or $0.30 per share, in the second quarter of fiscal 2025.
Adjusted net income declined to $179 million from $248 million a year earlier.
Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) decreased to $784 million, compared with $848 million in the prior-year period.
The decline in adjusted EBITDA reflects continued pressure on operating profitability despite the company meeting revenue expectations.
Albertsons’ results indicate that cost pressures and weaker sales performance remain challenges for the business.
Albertsons reported a 0.8% decline in identical sales during the quarter.
Identical sales measure revenue performance across comparable stores, excluding the effects of changes to the store network.
The decline indicates softer underlying sales performance despite growth in certain business categories.
Digital sales increased 11% year on year, reflecting continued customer demand for online grocery shopping and related services.
The company’s pharmacy business also recorded growth, although management highlighted continuing pressures associated with the Inflation Reduction Act.
These developments demonstrate differences in performance across Albertsons’ operations, with digital and pharmacy sales expanding while overall identical sales declined.
However, growth in digital services also contributed to higher fulfilment costs, placing additional pressure on the company’s margins.
Albertsons reported a gross margin rate of 26.8% for the second quarter, compared with 27.0% a year earlier.
The 20-basis-point decline was primarily attributed to higher delivery and handling costs associated with digital sales growth, alongside increased inventory shrink.
Shrink generally refers to inventory losses arising from factors such as theft, damage, spoilage and administrative discrepancies.
The increase in these costs reduced the proportion of revenue retained after accounting for the direct costs of goods sold.
Selling and administrative expenses also increased as a percentage of revenue.
The expense ratio rose to 25.6%, compared with 25.4% in the previous year.
Albertsons attributed the increase partly to sales deleveraging resulting from lower identical sales.
Sales deleveraging occurs when fixed or relatively stable operating expenses represent a larger proportion of revenue as sales weaken.
The combination of lower gross margins and higher administrative expense ratios contributed to the decline in adjusted EBITDA.
Alongside its quarterly results, Albertsons announced that it is suspending its previously issued financial guidance for fiscal 2026.
The decision comes as management undertakes a comprehensive review of the company’s operations, cost structure and strategic priorities.
Albertsons expects the review to conclude during the fourth quarter.
The company plans to provide a refreshed financial framework alongside its turnaround strategy by the time of its fourth-quarter earnings call.
Management also intends to host an investor day in spring 2027 to discuss its longer-term plans.
The withdrawal means investors no longer have an active full-year financial forecast from the company while the review is underway.
Albertsons has not provided replacement revenue, earnings or profitability targets.
Chief Executive Officer Susan Morris acknowledged that the company’s financial performance remains below management’s expectations.
“Although our second quarter performance was in-line with the expectations in our revised outlook, our results do not reflect the potential of the Company,” Morris said.
“We are launching a comprehensive business review to speed up improvements in Albertsons’ performance and tackle even harder a cost structure we can no longer afford.”
Her comments indicate that the company intends to pursue more extensive operational changes rather than rely solely on incremental improvements.
The review will assess areas where Albertsons believes it can improve efficiency, strengthen its competitive position and allocate capital more effectively.
Management has not yet disclosed specific cost-saving targets or the financial impact of the proposed changes.
Albertsons said its business review will examine several areas of its operations.
These include its customer strategy, cost structure, operating model and portfolio of retail banners.
The company will also assess its geographical markets, business assets and capital allocation priorities.
The broad scope suggests management is considering changes across both operational and strategic areas of the business.
A review of the company’s retail banners and markets could influence its future store network strategy, although Albertsons has not announced specific closures, disposals or restructuring decisions.
Similarly, the examination of capital allocation priorities may affect future investment decisions, but no revised spending plans have been disclosed.
The company expects to present further details once the review has progressed.
Albertsons’ 11% increase in digital sales was a positive element of its second-quarter performance.
However, the associated increase in delivery and handling expenses contributed to pressure on gross margins.
The results highlight the challenge of expanding online grocery services while maintaining profitability.
Digital grocery operations can involve additional fulfilment, delivery and technology costs compared with traditional in-store purchases.
Albertsons’ turnaround strategy may therefore need to address the economics of its digital operations alongside wider cost reductions.
The company has not announced specific changes to its online fulfilment model.
Further information about its customer and operating strategies is expected following the business review.
Albertsons’ second-quarter results showed adjusted earnings ahead of forecasts but continued weakness in underlying sales and profitability.
Revenue was broadly unchanged year on year, while identical sales declined and both gross margins and adjusted EBITDA deteriorated.
The company’s decision to withdraw fiscal 2026 guidance introduces additional uncertainty while management assesses potential changes to its operations.
The forthcoming business review will be central to determining how Albertsons intends to address its cost structure and improve financial performance.
Investors will be watching for the conclusion of the review during the fourth quarter, followed by an updated financial framework and turnaround plan.
The planned investor day in spring 2027 is expected to provide a further opportunity for management to explain its longer-term strategy and financial priorities.
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