Albertsons reports strong Q1 fiscal 2023 results
Despite a challenging economic environment, Albertsons had a healthy first quarter, with identical sales increasing 4.9%, digital sales increasing 22% and loyalty members increasing 16% to 35.9 million.
"Our first quarter results demonstrate the resilience of our business, and the effectiveness of our Customers for Life transformation strategy, even as the economic environment has become more challenging. We want to thank all our teams for their commitment to our customers and communities," said Vivek Sankaran, CEO of Albertsons.
Sankaran continued, "As we look ahead to the balance of the year, we remain focused on driving operational excellence in our stores and continued growth in our digital and pharmacy operations. We will also continue to drive the initiatives supporting our Customers for Life strategy, including delivering on our customer promises, deepening our relationships with them, and serving them where, when and how they want to be served."
"We are also mindful of the evolving economic backdrop, including slowing food inflation, declining government assistance and higher interest rates, and their potential effects on consumer spending and our business. We also expect to see ongoing labor investment, broad inflationary cost increases and significant declines in COVID-19 vaccination and test kit revenue. These headwinds, however, are expected to be partially offset by the benefits of our productivity initiatives," Sankaran said.
Albertsons’ net sales and other revenue was $24.1 billion during the quarter of fiscal 2023 compared to $23.3 billion during the prior year period. The increase was driven by the company's 4.9% increase in identical sales, with retail price inflation across most categories, growth in pharmacy and increasing digital penetration contributing to the identical sales increase. The increase in net sales and other revenue was partially offset by lower fuel sales, the company said.
Albertsons’ gross margin rate decreased to 27.7% during the first quarter of fiscal 2023 compared to 28.1% during the first quarter of fiscal 2022. Excluding the impact of fuel and LIFO expense, gross margin rate decreased 91 basis points compared to the first quarter of fiscal 2022.
Pharmacy operations drove almost half of the rate decrease with the remaining decrease being the result of increases in shrink, picking and delivery costs related to the continued growth in digital sales, and warehouse costs. The rate decrease related to pharmacy operations was primarily due to growth in pharmacy sales and fewer COVID-19 vaccines in the first quarter of fiscal 2023. In addition, benefits from the company’s productivity initiatives allowed Albertsons to provide incremental price investments to its customers during the first quarter of fiscal 2023, the company said.
[Read more: Kroger to acquire Albertsons for $24.6B]
Albertsons’ net income was $417.2 million, or 72 cents per share, during the first quarter of fiscal 2023, which included the $49.7 million or 9 cents per share benefit related to the reduction in the reserve for an uncertain tax position. Net income was $484.2 million, or 84 cents per share, during the first quarter of fiscal 2022.
The company's adjusted net income was $545.7 million, or 93 cents per share (which includes the tax benefit discussed above), during the first quarter of fiscal 2023 compared to $582 million, or $1.00 per share, during the first quarter of fiscal 2022.
Albertsons' adjusted EBITDA was $1.319 billion, or 5.5% of net sales and other revenue, during the first quarter of fiscal 2023 compared to $1.420 billion, or 6.1% of net sales and other revenue, during the first quarter of fiscal 2022. The company attributed the decrease in adjusted EBITDA in the first quarter of fiscal 2023 to fewer COVID-19 vaccinations and a decrease in gross margin rate compared to the first quarter of fiscal 2022.
[Read more: Albertsons invests in pharmacy to support comprehensive immunization access]
Albertsons said it expects a continued decline in providing COVID-19 vaccinations and at-home test kits, resulting in an approximate $130 million headwind to adjusted EBITDA for the remaining three quarters of fiscal 2023.