Albertsons Companies: Reports Q2 Fiscal 2024 Results

Boise / ID. (abc) Albertsons Companies reported results for the second quarter of fiscal 2024, which ended in Idaho’s City of Trees on September 07, 2024. Second quarter of fiscal 2024 financial highlights:

«In Q2-2024, investments in our Customers for Life strategy continued to drive strong growth in our digital sales and pharmacy operations,» said Vivek Sankaran, CEO. «We also drove strong year-over-year growth in our loyalty members and omnichannel shoppers, and accelerated growth in our Albertsons Media Collective. We want to thank our teams for their ongoing commitment to serving our customers and supporting the communities in which we operate. 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 an increasingly competitive backdrop. We expect these headwinds to be partially offset by ongoing and new productivity initiatives.»

Second Quarter of Fiscal 2024 Results

Net sales and other revenue was USD 18.6 billion during the 12 weeks ended September 07, 2024 compared to USD 18.3 billion during the 12 weeks ended September 09, 2023. The increase was driven by our 2.5 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 24 percent increase during the second quarter of fiscal 2024. The increase in Net sales and other revenue was partially offset by lower fuel sales.

Gross margin rate was unchanged at 27.6 percent during both the second quarter of fiscal 2024 and the second quarter of fiscal 2023. Excluding the impact of fuel and LIFO expense, gross margin rate decreased 44 basis points compared to the second quarter of fiscal 2023. The strong growth in pharmacy sales, which carries an overall lower gross margin rate, 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 the benefits from our procurement and sourcing productivity initiatives.

Selling and administrative expenses increased to 25.8 percent of Net sales and other revenue during the second quarter of fiscal 2024 compared to 25.1 percent during the second quarter of fiscal 2023. Excluding the impact of fuel, Selling and administrative expenses as a percentage of Net sales and other revenue increased 41 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 business transformation costs and additional third-party store security services, partially offset by the benefits from our productivity initiatives.

Net loss on property dispositions and impairment losses was USD 43.9 million during the second quarter of fiscal 2024 compared to net gain of USD 8.4 million during the second quarter of fiscal 2023. The net loss on impairment during the second quarter of fiscal 2024 was primarily due to impairment losses of USD 39.8 million primarily related to equipment from the closing of our micro-fulfillment centers and USD 13.5 million of retail store impairment losses, partially offset by USD 9.4 million of gains from the sale of real estate assets.

Interest expense, net was USD 103.6 million during the second quarter of fiscal 2024 compared to USD 111.9 million during the second quarter of fiscal 2023. The decrease in interest expense, net was primarily attributable to lower average outstanding borrowings.

Other expense, net was USD 1.9 million during the second quarter of fiscal 2024 compared to USD 8.1 million during the second quarter of fiscal 2023.

Income tax expense was USD 41.0 million, representing a 22.0 percent effective tax rate, during the second quarter of fiscal 2024 compared to USD 67.5 million, representing a 20.2 percent effective tax rate, during the second quarter of fiscal 2023.

Net income was USD 145.5 million, or USD 0.25 per share, during the second quarter of fiscal 2024, compared to USD 266.9 million, or USD 0.46 per share, during the second quarter of fiscal 2023.

Adjusted net income was USD 301.0 million, or USD 0.51 per share, during the second quarter of fiscal 2024, compared to USD 367.7 million, or USD 0.63 per share, during the second quarter of fiscal 2023.

Adjusted Ebitda was USD 900.6 million, or 4.9 percent of Net sales and other revenue, during the second quarter of fiscal 2024 compared to USD 976.9 million, or 5.3 percent of Net sales and other revenue, during the second quarter of fiscal 2023.

Capital Expenditures

During the first 28 weeks of fiscal 2024, capital expenditures were USD 952.3 million, which primarily included the completion of 44 remodels, the opening of two new stores and continued investment in our digital and technology platforms.

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 our Quarterly Report on Form 10-Q for the second quarter of fiscal 2024 filed with the Securities and Exchange Commission (SEC) on October 15, 2024.