Albertsons Companies Inc (ACI, Financial), the second largest supermarket operator in the United States with over 2,200 stores, reported its first quarter fiscal 2024 results. The company, which generates about 80% of its sales from non-perishable and fresh food, also operates fuel centers and pharmacies at approximately 20% and 75% of its store locations, respectively.
Performance Overview
For the first quarter of fiscal 2024, Albertsons Companies Inc (ACI, Financial) reported net income of $241 million, or $0.41 per share, falling short of the analyst estimate of $0.44 per share. Adjusted net income was $392 million, or $0.66 per share, surpassing the analyst estimate of $0.44 per share. The company's net sales and other revenue reached $24.3 billion, surpassing the analyst estimate of $18.39 billion.
Identical sales increased by 1.4%, driven by strong growth in pharmacy sales. Digital sales saw a significant rise of 23%, and loyalty members increased by 15% to 41.4 million.
Financial Achievements and Challenges
Albertsons Companies Inc (ACI, Financial) achieved a gross margin rate of 27.8%, a slight increase from 27.7% in the same period last year. However, excluding the impact of fuel and LIFO expense, the gross margin rate decreased by 22 basis points. The decrease was primarily due to the growth in pharmacy sales, which carry a lower gross margin rate, increases in shrink, and higher picking and delivery costs related to digital sales growth.
Selling and administrative expenses rose to 25.9% of net sales and other revenue, up from 25.0% in the previous year. This increase was mainly due to higher operating expenses related to digital and omnichannel development, merger-related costs, higher employee costs, increased store occupancy costs, and additional third-party store security services.
Income Statement Highlights
| Metric | Q1 FY2024 | Q1 FY2023 |
|---|---|---|
| Net Sales and Other Revenue | $24.3 billion | $24.1 billion |
| Gross Margin | $6.7 billion | $6.6 billion |
| Selling and Administrative Expenses | $6.3 billion | $6.0 billion |
| Net Income | $241 million | $417 million |
| Adjusted EBITDA | $1.18 billion | $1.32 billion |
Balance Sheet and Cash Flow
Albertsons Companies Inc (ACI, Financial) reported total assets of $26.1 billion as of June 15, 2024, slightly down from $26.2 billion as of February 24, 2024. The company's cash and cash equivalents increased to $291.1 million from $188.7 million. Total liabilities stood at $15.2 billion, with stockholders' equity at $2.9 billion.
Net cash provided by operating activities was $960.9 million, up from $838.3 million in the same period last year. However, net cash used in investing activities was $538.0 million, primarily due to capital expenditures of $543.0 million. Net cash used in financing activities was $320.8 million.
Commentary and Future Outlook
"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."
"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," Sankaran concluded.
Albertsons Companies Inc (ACI, Financial) continues to navigate a challenging economic environment while investing in its digital and omnichannel capabilities. The company's focus on its Customers for Life strategy and loyalty program is expected to drive future growth, despite anticipated headwinds.
Explore the complete 8-K earnings release (here) from Albertsons Companies Inc for further details.
