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Albertsons (ACI) Q1 Earnings Top, Identical Sales Rise, View Up

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Albertsons Companies, Inc. (ACI - Free Report) reported first-quarter fiscal 2022 results, wherein both the top and the bottom lines not only surpassed the Zacks Consensus Estimate but also improved year over year. The company's focus on providing efficient in-store services, enhancing digital and omni-channel capabilities, and efforts to bolster productivity drove the quarterly results. Better-than-expected results prompted management to lift fiscal 2022 guidance.

Let's Delve Deeper

Albertsons Companies posted adjusted quarterly earnings of $1.00 per share that comfortably surpassed the Zacks Consensus Estimate of 90 cents and improved from 89 cents reported in the prior-year period. Higher net sales and other revenues, as well as lower interest expenses, contributed to the bottom-line performance.

Net sales and other revenues of this food and drug retailer were $23,310.3 million, up 9.6% year over year. The top line beat the Zacks Consensus Estimate of $22,744 million. The upside was driven by a 6.8% rise in identical sales and higher fuel sales, with retail price inflation contributing to the identical sales increase. We note digital sales surged 28% year over year during the quarter. Identical sales have increased in mid-single-digit so far in the second quarter.

Gross profit amounted to $6,545 million, up 5.7% year on year. However, gross margin contracted 10 basis points to 28.1%. Excluding the impact of fuel and LIFO expenses, gross margin rate shrunk 27 basis points compared with the last year due to fewer COVID-19 vaccines in the quarter under review. The COVID-19 impact was partly offset by the gross margin rate benefits from productivity initiatives. However, higher product and supply chain costs did impact the margin to an extent.

Selling and administrative expenses rose 6.6% to $5,864.3 million. As a percentage of net sales and other revenues, selling and administrative expenses decreased 70 basis points to 25.2%. Excluding the impact of fuel, selling and administrative expenses as a percentage of net sales and other revenue shriveled 15 basis points. This decline was due to lower pandemic-related expenses and the execution of productivity initiatives. These were partly offset by investments related to the acceleration of digital and omnichannel capabilities, market-driven wage rate increases, and higher depreciation and amortization.

Adjusted EBITDA increased 8.6% to $1,420.3 million; however, adjusted EBITDA margin contracted 10 basis points to 6.1% on a year-over-year basis.

Albertsons Companies, Inc. Price, Consensus and EPS Surprise

Albertsons Companies, Inc. Price, Consensus and EPS Surprise

Albertsons Companies, Inc. price-consensus-eps-surprise-chart | Albertsons Companies, Inc. Quote

Other Financial Details

Albertsons Companies ended the quarter with cash and cash equivalents of $3,213.1 million as of Jun 18, 2022. Long-term debt and finance lease obligations totaled $7,121.2 million, while total stockholders' equity amounted to $4,070.6 million.

Capital expenditures during the quarter were nearly $613.8 million, involving investments toward modernization of store fleet, comprising 27 remodels and building of digital and technology platforms. Management anticipates capital expenditures for fiscal 2022 between $2 billion and $2.1 billion. The company returned $63 million to shareholders through dividends.

Upbeat View

For fiscal 2022, management now expects identical sales to increase in the range of 3% to 4% against the 0.1% decline witnessed in fiscal 2021, driven by continued inflation and market share gains. Albertsons Companies had earlier guided identical sales increase of 2% to 3%. The company envisions identical sales to be above the full-year range in the second quarter and below in the back half due to cycling heightened inflation in the back half of fiscal 2021.

Adjusted earnings are anticipated in the range of $2.80 to $2.95 per share, up from the prior projection of $2.70 to $2.85 per share. The current view still suggests a decline from adjusted earnings of $3.07 reported in fiscal 2021.

The company now expects fiscal 2022 adjusted EBITDA between $4.25 billion and $4.35 billion compared with adjusted EBITDA of $4,398 million reported in fiscal 2021. It had earlier forecast fiscal 2022 adjusted EBITDA in the bracket of $4.15 billion to $4.25 billion.

Albertsons Companies expects gross margin rate, excluding fuel and LIFO, to be down marginally in fiscal 2022.

Shares of this Zacks Rank #2 (Buy) company have surged 28% in the past year against the industry's decline of 31.1%.

3 More Stocks Looking Red Hot

Here we highlight three other top-ranked stocks, namely, Dollar Tree (DLTR - Free Report) , Sysco Corporation (SYY - Free Report) and Kroger (KR - Free Report) .

Dollar Tree, which operates discount variety retail stores, sports a Zacks Rank #1 (Strong Buy) at present. DLTR has a trailing four-quarter earnings surprise of 13.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Dollar Tree’s current financial-year sales and EPS suggests growth of 6.7% and 40.5%, respectively, from the year-ago reported numbers. DLTR has an expected EPS growth rate of 15.5% for three-five years.

Sysco Corporation, which is engaged in the marketing and distribution of various food and related products, carries a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 9.1%, on average.

The Zacks Consensus Estimate for Sysco Corporation’s current financial year sales and EPS suggests growth of 32.5% and 124.3%, respectively, from the year-ago period. SYY has an expected EPS growth rate of 9% for three-five years.

Kroger, the renowned grocery retailer, carries a Zacks Rank of 2 (Buy) at present. KR has an expected EPS growth rate of 11.3% for three-five years.

The Zacks Consensus Estimate for Kroger’s current financial-year sales and EPS suggests growth of 6.7% and 6.3%, respectively, from the year-ago reported number. KR has a trailing four-quarter earnings surprise of 20.3%, on average.