Albertsons Companies, Inc. (NYSE: ACI) stock is trading higher Tuesday after the grocery chain reported better-than-expected second-quarter fiscal 2026 results.

Second-Quarter Earnings Beat Estimates

Albertsons reported adjusted earnings of 36 cents per share, beating the analyst estimate of 33 cents.

Net sales and other revenue fell 0.1% year over year to $18.895 billion but topped the $18.867 billion consensus estimate.

Identical sales declined 0.8%, while digital sales rose 11%.

GAAP net income fell to $51.5 million, or 11 cents per share, from $168.5 million, or 30 cents per share, a year earlier.

Adjusted net income declined to $179 million from $248.4 million, while adjusted EBITDA dropped to $784 million from $848.4 million.

Higher Costs Pressure Margins

Gross margin narrowed to 26.8% from 27% a year earlier. Excluding fuel and LIFO expense, gross margin declined 17 basis points, mainly due to higher digital fulfillment costs and inventory shrink.

Improved pharmacy margins partly offset these pressures. Pharmacy sales continued to grow despite headwinds from the Inflation Reduction Act.

Selling and administrative expenses increased to 25.6% of revenue from 25.4%, reflecting lower identical sales.

Albertsons recorded $42.4 million in property disposition and impairment losses, compared with $4.4 million a year earlier.

Net interest expense rose to $125 million from $105.3 million due to higher average borrowings.

Total debt, including finance leases, reached $9.328 billion, while cash and cash equivalents stood at $282 million. The net debt ratio increased to 2.42 from 2.02 a year earlier.

Cash Flow Supports Store Investments

Albertsons generated $1.210 billion in operating cash flow during the first 28 weeks of fiscal 2026.

Capital expenditures totaled $899.6 million, including investments in 38 store remodels, seven new stores and digital platforms.

The company also repurchased $387.6 million in shares and maintained its quarterly dividend of 17 cents per share.

Albertsons Withdraws Outlook Amid Turnaround Review

Albertsons withdrew its fiscal 2026 outlook as management conducts a comprehensive review of the business.

As part of its ACI Edge initiative, the company consolidated 11 divisions into four regions and centralized center-store merchandising.

The review covers pricing, customer strategy, costs, operations, store banners, assets and capital allocation.

Albertsons expects to present an updated financial framework and turnaround plan during its fourth-quarter earnings call.

Executives Signal Major Changes Ahead

During Tuesday's earnings call, Albertsons Executive Chair Meg Whitman warned that "dramatic improvement is needed now," acknowledging that the grocery chain's sales growth, earnings and market share have fallen short of expectations.

Whitman called for faster cost reductions, lower prices and better store operations. She also said the company must review its portfolio of businesses and consider strategic actions to improve shareholder value.

Whitman also indicated that broader structural changes remain possible, with all options under consideration as Albertsons evaluates how to compete more effectively.

CEO Susan Morris said the company is accelerating centralized buying, simplifying operations and strengthening accountability under ACI Edge.

However, Morris warned that lower-income consumers remain under pressure. She said shoppers continue to seek discounts, trade down to cheaper products and favor private-label brands.

Morris also acknowledged that Albertsons needs to improve its competitive pricing position.

ACI Price Action: Albertsons Companies shares were up 2.23% at $12.82 at the time of publication Tuesday, according to market data.