BOISE, IDAHO — Following the failed merger with larger rival The Kroger Co., Albertsons Cos. remains confident in its strategy to boost market share and customer loyalty in an increasingly omnichannel grocery retail market, said chief executive officer Vivek Sankaran.

The nation’s second-largest conventional supermarket operator took a good first step in the post-merger period by topping the high end of Wall Street’s earnings estimate for its fiscal 2024 third quarter and posting increased net and identical sales.

For Albertsons, the quarterly earnings call with analysts marked the Boise-based company’s first in over two years as it awaited the outcome of the up-and-down antitrust review of the planned acquisition by Kroger, announced in mid-October 2022. The lengthy process ended last month with federal and state regulators stopping the $24.6 billion deal, both retailers terminating the merger and Albertsons filing a lawsuit claiming that Kroger breached the merger pact.

“While we are disappointed that the merger was terminated, we never stopped investing in our business while driving our ‘Customers for Life’ strategy,” Sankaran said in a Jan. 8 conference call with analysts. “I’d like to use my time with you today to provide an update on what we have been working on since the merger was announced and give you an early view of our strategic priorities moving forward.

“Over the last two years, we have continued to drive and evolve four priorities: one, driving customer growth and engagement through digital connection; two, enhancing the customer value proposition; three, modernizing capabilities through technology; and four, driving transformational productivity.”

Q3 shows investments bearing fruit

Albertsons’ Customers for Life strategy focuses on efforts to enhance its fresh food, private label, and health and wellness (including pharmacy) offerings; provide more value to consumers; grow its loyalty program; improve its in-store experience; expand omnichannel access; drive retail media revenue; and optimize its supply chain.

“We are pleased with our third-quarter results and the operational benefits we are seeing from the investments we have made in our business,” Sharon McCollam, president and chief financial officer, told analysts in the call. “We are a stronger company today than pre-merger, and the initiatives that have driven these results affirm our confidence in our future. We delivered solid operating and financial performance during the quarter across all key metrics in an environment where the consumer remains cautious.”

For the quarter ended Nov. 30, 2024, net income rose to $400.6 million, equal to 69¢ per share on the common stock, from $361.4 million, or 62¢ per share, a year earlier. Adjusted net earnings were $420.3 million, or 71¢ per share, versus year-ago results of $462.3 million, or 79¢ per share, reflecting the impact of merger-related adjustments and other items. Analysts, on average, had forecast adjusted earnings per share of 64¢, with a range of 60¢ to 69¢.

Adjusted EBITDA came in at nearly $1.07 billion, compared with almost $1.11 billion in the prior-year quarter.

“As we look forward, we start this next chapter in strong financial condition with a track record of positive business performance,” Sankaran said.

At the top line, third-quarter net sales and other revenue edged up 1.2% to $18.77 billion from $18.56 billion a year ago. Albertsons attributed the increase to a 2% uptick in identical sales, driven by gains of 13% in pharmacy sales and 23% in digital sales. Membership in Albertsons’ “for U” loyalty program climbed 15% to 44.3 million in the quarter.

Over the next three years, Albertsons expects technology and cost initiatives to generate $1.5 billion in savings to invest in its customer value proposition and growth efforts, as well as offset inflationary headwinds, Sankaran said. He noted that the grocer’s value proposition reflects not just price but also the benefits of its in-store and online services.

“To date, loyalty memberships, digitally engaged customers, omnichannel households and transaction counts are all growing because our Customers for Life strategy places the customer at the center of everything we do,” Sankaran said. “So as our customers’ needs for value evolve due to inflationary pressures, so are our strategies to address these needs.

“These strategies to drive better value for customers, in addition to increasing total category growth, include working with our vendor partners to strategically invest in price in certain categories and markets and increasing own-brands penetration. To deliver this, we will source products that customers trust and need at a better value to drive profitable unit growth and increase share of wallet from existing customers. In own brands, we will also offer products at an attractive entry price point so that customers always have an accessible alternative and more prominently feature existing own brands offerings.”

Grocer sits in “strong position”

Looking ahead, Albertsons raised its fiscal 2024 adjusted EPS guidance to $2.25 to $2.31, compared with $2.20 to $2.30 previously. The company also lifted its adjusted EBITDA forecast to between $3.95 billion and $3.99 billion (versus $3.90 billion to $3.98 billion previously) and updated its identical sales growth outlook to 1.8% to 2% (versus 1.8% to 2.2% previously). Capital expenditures are expected to remain $1.8 billion to $1.9 billion.

“Our balance sheet is strong, and it provides flexibility as we drive our business forward and seek to generate long-term sustainable shareholder value,” McCollam said.

Just before its third-quarter report, Albertsons announced a 25% increase in its dividend to 15¢ per share of common stock. The company had unveiled plans for the dividend hike, plus a share repurchase authorization of up to $2 billion, in December when announcing its termination of the merger agreement with Kroger.

“Over the last two years, we have invested heavily in our core business, developed new sources of revenue and strengthened our capabilities through the rollout of new technologies,” Sankaran told analysts. “We have retained our best talent and even added and strengthened talent in critical positions. Our Customers for Life strategy is working. We have added loyalty members, digitally engaged customers, omnichannel households and increased transaction counts. Our stores are operating more effectively and efficiently as our new technologies take hold, and we are proactively managing our costs. Our productivity programs, both old and new, are creating fuel for investments and are an offset to inflationary headwinds.

“We believe all of this puts us in a strong position to continue to transform the business and adapt to an ever-changing consumer landscape. We also know that we must elevate our performance to compete with the very best in our industry. We are energized by that challenge and see a path to doing so.”

As of Nov. 30, Albertsons Cos. operated 2,273 food stores, 1,732 pharmacies, 405 fuel stations, 22 distribution centers and 19 manufacturing plants, with retail locations across 34 states and the District of Columbia under more than 20 banners, including Albertsons, Safeway, Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets and Balducci’s Food Lovers Market.