Albertsons (ACI) had a rough Friday. The grocery chain's stock fell in premarket trading after it served up mixed first-quarter results, slashed its full-year outlook, and announced a big restructuring plan. It's a classic case of a company caught between inflation-weary shoppers and fierce competition from deep-pocketed rivals.
Adjusted earnings came in at 42 cents per share, well below the 54-cent analysts were expecting. Revenue was a bright spot—$24.942 billion, slightly above estimates—but that's about where the good news ends. GAAP earnings dropped to 17 cents from 41 cents a year ago, and net income fell to $84.7 million from $236.4 million. Adjusted EBITDA also slipped to $1.013 billion from $1.111 billion.
The big story here is the customer. Lower-income shoppers are feeling the pinch, and they're voting with their wallets. CEO Susan Morris told analysts that the company's biggest customer losses are to Walmart (Walmart), Amazon (Amazon), and Aldi—especially among price-sensitive consumers. That's a tough trio to compete with. Walmart has its everyday low prices, Amazon has convenience and Prime perks, and Aldi has its no-frills, low-cost model. Albertsons is fighting back with targeted price investments, personalized loyalty offers, and more private-label promotions. But it's an uphill battle.
Digital Growth Stands Out
Identical sales—a key metric for grocers—fell 0.8% as core grocery faced softer unit trends and cautious consumers. But digital sales rose 13%, and pharmacy continued to grow despite headwinds from the Inflation Reduction Act. Morris noted, "Digital sales grew 13% this quarter with penetration increasing nearly to 10.5%." She added, "These results were below our expectations and we're taking decisive action to improve future performance." One bright spot: "E-commerce was profitable in the first quarter. This milestone demonstrates that we are successfully growing digital sales while improving the underlying economics of the platform." Albertsons is investing in AI tools for digital shopping, merchandising, and labor optimization, with partnerships involving Google, OpenAI, and Microsoft.
Margins Remain Pressured
Gross margin slipped to 26.6% from 27.1%, hurt by higher digital delivery and fuel costs. President and CFO Sharon McCollam explained, "Reported results were pressured by approximately 100 basis points from the impact of the Inflation Reduction Act and 50 basis points from egg deflation." Operating cash flow was $728.9 million, with capital expenditures of $522.1 million. The company ended the quarter with $293.4 million in cash and $9.163 billion in total debt.
ACI Edge Restructuring
Albertsons announced a restructuring plan called ACI Edge, which consolidates 11 divisions into four regions and centralizes center-store merchandising. Management expects about $200 million in incremental annual run-rate benefits, with most savings realized in fiscal 2027. Transition costs are expected to total about $50 million across fiscal 2026 and 2027.
Guidance Cut Draws Downgrades
The company slashed its fiscal 2026 adjusted EPS guidance to $1.75–$1.85 from $2.22–$2.32, well below the $2.27 estimate. Adjusted EBITDA guidance was cut to $3.55 billion–$3.625 billion, and identical sales are now expected to be negative 1.5% to negative 0.5%, including a 150-basis-point headwind from the Inflation Reduction Act's Medicare Drug Price Negotiation Program. Capital spending is expected at $1.9 billion–$2 billion.
Wall Street reacted swiftly. Telsey Advisory Group downgraded Albertsons to Market Perform and cut its price target to $13 from $22. BMO Capital also downgraded to Market Perform, slashing its target to $12 from $23. Wells Fargo downgraded to Equal Weight and reduced its target to $11 from $18. Ouch.
ACI Price Action: Albertsons shares were down 1.53% at $11.27 in premarket trading Friday, following a 21.64% drop in the previous session.
