Albertsons Companies: Reports Q1 Fiscal 2024 Results

Boise / ID. (abc) Albertsons Companies reported results for the first quarter of fiscal 2024, which ended in Idaho’s City of Trees on June 15, 2024. First quarter of fiscal 2024 financial highlights:

• Identical sales increased 1.4 percent
• Digital sales increased 23 percent
• Loyalty members increased 15 percent to 41.4 million
• Net income of USD 241 million, or USD 0.41 per share
• Adjusted net income of USD 392 million, or USD 0.66 per share
• Adjusted Ebitda of USD 1,184 million

«In the first quarter of fiscal 2024, we continued to invest in our Customers for Life strategy and the digital and omnichannel capabilities necessary to support it,» said Vivek Sankaran, CEO. «Our Customers for Life strategy is placing the customer at the center of everything we do, and we continued to drive strong year-over-year growth in loyalty members as we launched our new simplified «for U» loyalty program. Amidst an evolving economic and industry backdrop, we continued to deliver outsized growth in our digital and pharmacy businesses. We want to thank our teams for their ongoing commitment to serving our customers and supporting our communities. As we look ahead to the balance of fiscal 2024, we expect to see continuing headwinds related to investments in associate wages and benefits, an increasing mix of our pharmacy and digital businesses which carry lower margins, and the cycling of prior year food inflation. We expect these headwinds to be partially offset by ongoing productivity initiatives.»

First Quarter of Fiscal 2024 Results

Net sales and other revenue was USD 24.3 billion during the 16 weeks ended June 15 (Q1-2024) compared to USD 24.1 billion during Q1-2023 – also counting 16 weeks. The increase was driven by the Company’s 1.4 percent increase in identical sales, with strong growth in pharmacy sales driving the identical sales increase. We also continued to grow our digital sales with a 23 percent increase during the first quarter of fiscal 2024. The increase in Net sales and other revenue was partially offset by lower fuel sales.

Gross margin rate increased to 27.8 percent during the first quarter of fiscal 2024 compared to 27.7 percent during the first quarter of fiscal 2023. Excluding the impact of fuel and LIFO expense, gross margin rate decreased 22 basis points compared to the first quarter of fiscal 2023. The strong growth in pharmacy sales, which carries an overall lower gross margin rate, increases in shrink, and increases in picking and delivery costs related to the continued growth in our digital sales were the primary drivers of the decrease, partially offset by our procurement and sourcing productivity initiatives.

Selling and administrative expenses increased to 25.9 percent of Net sales and other revenue during the first quarter of fiscal 2024 compared to 25.0 percent during the first quarter of fiscal 2023. Excluding the impact of fuel, Selling and administrative expenses as a percentage of Net sales and other revenue increased 79 basis points. The increase in Selling and administrative expenses as a percentage of Net sales and other revenue was primarily attributable to an increase in operating expenses related to the ongoing development of our digital and omnichannel capabilities, Merger-related costs, higher employee costs, increased store occupancy costs and additional third-party store security services, partially offset by the benefit of productivity initiatives.

Net loss on property dispositions and impairment losses was USD 5.3 million during the first quarter of fiscal 2024 compared to USD 27.6 million during the first quarter of fiscal 2023.

Interest expense, net was USD 145.7 million during the first quarter of fiscal 2024 compared to USD 154.9 million during the first quarter of fiscal 2023. The decrease in interest expense, net was primarily attributable to lower average outstanding borrowings.

Other expense, net was USD 4.0 million during the first quarter of fiscal 2024 compared to other income, net of USD 16.0 million during the first quarter of fiscal 2023.

Income tax expense was USD 69.2 million, representing a 22.3 percent effective tax rate, during the first quarter of fiscal 2024 compared to USD 66.1 million, representing a 13.7 percent effective tax rate, during the first quarter of fiscal 2023. The increase in the effective income tax rate in the first quarter of fiscal 2024 was primarily due to the reduction of a reserve for an uncertain tax position due to the expiration of a statute during the first quarter of fiscal 2023.

Net income was USD 240.7 million, or USD 0.41 per share, during the first quarter of fiscal 2024. Net income was USD 417.2 million, or USD 0.72 per share, during the first quarter of fiscal 2023, which included the USD 49.7 million or USD 0.09 per share benefit related to the reduction in the reserve for an uncertain tax position.

Adjusted net income was USD 391.6 million, or USD 0.66 per share, during the first quarter of fiscal 2024 compared to USD 545.7 million, or USD 0.93 per share (which includes the tax benefit discussed above), during the first quarter of fiscal 2023.

Adjusted Ebitda was USD 1,183.9 million, or 4.9 percent of Net sales and other revenue, during the first quarter of fiscal 2024 compared to USD 1,318.5 million, or 5.5 percent of Net sales and other revenue, during the first quarter of fiscal 2023.

First Quarter 2024 Capital Expenditures

During the first 16 weeks of fiscal 2024, capital expenditures were USD 543.0 million, which primarily included the completion of 17 remodels, the opening of one new store and continued investment in our digital and technology platforms.

Previously Announced Merger Agreement

As previously announced, on October 13, 2022, the Company entered into an Agreement and Plan of Merger with The Kroger Company and Kettle Merger Sub Inc. Under the terms of the Merger Agreement, subject to regulatory approval, Kroger through Kettle Merger Sub Inc. will acquire all of the outstanding shares of the Company’s common stock. Details regarding the Merger Agreement and the transactions contemplated by the Merger Agreement are available in Albertsons’ Quarterly Report on Form 10-Q for the first quarter of fiscal 2024 filed with the Securities and Exchange Commission (SEC) on July 23, 2024.