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Albertsons (ACI) Beats on Q3 Earnings, Raises FY21 Outlook

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Albertsons Companies, Inc. (ACI - Free Report) reported third-quarter fiscal 2021 results, wherein both the top and the bottom lines not only surpassed the Zacks Consensus Estimate but also improved year over year. The better-than-expected performance prompted this Boise, ID-based company to raise the outlook for the fiscal year.

Favorable economic backdrop along with Albertsons Companies’ focus on providing efficient in-store services, enhancing digital and omni-channel capabilities, and efforts to bolster productivity drove the quarterly results. However, supply chain bottlenecks and inflationary pressure have hurt margins.

Shares of this Zacks Rank #2 (Buy) company have surged 46.4% in the past six months against the industry’s decline of 11.5%.

Let’s Take a Dig

Albertsons Companies posted adjusted quarterly earnings of 79 cents a share that comfortably surpassed the Zacks Consensus Estimate of 59 cents, and improved sharply from 66 cents reported in the prior-year period. Higher net sales and other revenues as well as lower SG&A expenses contributed to the bottom-line performance.

Net sales and other revenues of this food and drug retailer were $16,728.4 million, up 8.6% year over year. The top-line beat the Zacks Consensus Estimate of $16,080 million. The upside was driven by a 5.2% rise in identical sales as well as higher fuel sales and sales related to stores acquired and opened since third-quarter fiscal 2020. On a two-year stacked basis, the company’s identical sales were up 17.5%. Digital sales were up 9% year on year, while the same surged a whopping 234% on a two-year stacked basis.

 

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Gross profit amounted to $4,830.1 million, up 7.1% year on year. However, gross margin contracted 40 basis points to 28.9%. Excluding fuel, gross margin expanded 10 basis points due to productivity initiatives, improved pharmacy margins and favorable product mix, offset by lower gross margin rates across certain product categories due to the rate impact of higher product costs, on account of rising inflation and increased supply chain costs.

As a percentage of net sales and other revenues, selling and administrative expenses decreased 260 basis points to 25.4%. Excluding the impact of fuel and other charges, selling and administrative expenses as a percentage of net sales and other revenues decreased 20 basis points. This decline can be attributed to lower pandemic-related expenses and the execution of productivity initiatives, which were offset by increased employee expenses, depreciation and other costs.

Adjusted EBITDA increased 8.6% to $1,051.2 million, while adjusted EBITDA margin remained flat at 6.3% on a year-over-year basis.

Other Financial Details

Albertsons Companies ended the quarter with cash and cash equivalents of $2,661 million, as of Dec 4, 2021. Long-term debt and finance lease obligations amounted to $7,915.7 million, while total stockholders’ equity amounted to $2,310.7 million.

For the 40-week period ended Dec 4, net cash from operating activities was $2,782.8 million. Capital expenditures during this period were nearly $1,216.4 million, including investments toward digital and technology as well as the opening of nine new stores and the completion of 146 store remodels. Management anticipates capital expenditures for fiscal 2021 between $1.8 billion and $1.9 billion.

Guidance

For fiscal 2021, management expects identical sales to decline in the range of 0.8-1.2%. Previously, the company had anticipated identical sales to decrease in the bracket of 2.5-3.5%. On a two-year stacked basis, identical sales are expected to rise 15.7-16.1% compared with growth of 13.4-14.4% anticipated earlier.

Adjusted earnings are anticipated in the range of $2.90-$2.95 per share compared with the earlier view of $2.50-$2.60. In the prior year, the company reported adjusted earnings of $3.24. The Zacks Consensus Estimate for earnings currently stands at $2.63 for fiscal 2021.

The company expects adjusted EBITDA in the range of $4.25-$4.30 billion compared with the prior view of $3.95-$4.05 billion.

3 More Stocks Looking Red Hot

Here are three more favorably ranked stocks — Sanderson Farms (SAFM - Free Report) , Costco (COST - Free Report) and United Natural Foods (UNFI - Free Report) .

Sanderson Farms, which is engaged in the production, processing, marketing and distribution of fresh, frozen and minimally prepared chicken, sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Sanderson Farms’ current financial year EPS suggests significant growth from the year-ago reported figure. SAFM has a trailing four-quarter earnings surprise of 496.3%, on average.

Costco, which operates membership warehouses, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 8.3%, on average.

The Zacks Consensus Estimate for Costco’s current financial year sales and EPS suggests growth of 10.8% and 13.9%, respectively, from the year-ago period. COST has an expected EPS growth rate of 8.8% for three-five years.

United Natural Foods, the leading distributor of natural, organic, and specialty food and non-food products in the United States and Canada, carries a Zacks Rank #2. UNFI has a trailing four-quarter earnings surprise of 35.4%, on average.

The Zacks Consensus Estimate for United Natural Foods’ current financial year sales and EPS suggests growth of 4.8% and 7.7%, respectively, from the year-ago period.