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Albertsons Companies, Inc. (ACI - Free Report) reported second-quarter fiscal 2023 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. While the top line improved from the year-ago period, the bottom line declined.
ACI's commitment to improving in-store services, strengthening digital and omni-channel features, and boosting productivity has played a significant role in its positive performance.
In the fiscal second quarter, the company remained steadfast in its commitment to implementing the Customers for Life transformation strategy and achieved robust operational results despite escalating macro-economic challenges.
Albertsons Companies, Inc. Price, Consensus and EPS Surprise
Albertsons, which entered an “Agreement and Plan of Merger” with Kroger on Oct 13, 2022, posted adjusted quarterly earnings of 63 cents a share, which comfortably surpassed the Zacks Consensus Estimate of 57 cents. However, the bottom line declined from the 72 cents reported in the prior-year period.
Net sales and other revenues were $18,290.7 million, up 2.1% year over year. The top line beat the Zacks Consensus Estimate of $18,203 million. The upside was driven by a 2.9% rise in identical sales, with retail price inflation, growth in pharmacy and increasing digital penetration contributing to the metric. Top-line growth was partly offset by lower fuel sales. Impressively, digital sales rose 19% year over year in the quarter.
The gross profit amounted to $5,041.5 million, up 0.7% year over year. However, the gross margin contracted 30 basis points to 27.6%. We expected a year-over-year decline of 10 basis points in the gross margin for the quarter under review.
Excluding the impacts of fuel and LIFO expenses, the gross margin rate decreased 37 basis points from the second quarter of fiscal 2022. This decline was primarily driven by the robust growth in pharmacy operations, which generally have a lower gross margin rate, and an increase in shrink. These were partially offset by the company’s efforts to enhance procurement and sourcing productivity.
Image Source: Zacks Investment Research
Selling and administrative expenses rose 2.4% year over year to $4,595.5 million. As a percentage of net sales and other revenues, selling and administrative expenses increased 10 basis points to 25.1%. Excluding the impacts of fuel, selling and administrative expenses, as a percentage of net sales and other revenues, decreased 8 basis points. The reduction was primarily due to decreased employee costs, which also encompassed the advantages resulting from our continuous productivity initiatives. We anticipated a year-over-year increase of 2.5% in selling and administrative expenses.
Adjusted EBITDA decreased 6.8% to $976.9 million. Meanwhile, the adjusted EBITDA margin contracted 60 basis points to 5.3% on a year-over-year basis. The decline in adjusted EBITDA can be attributed to the company’s fuel business and fewer COVID-19 vaccinations in the quarter. We also expected a 60-basis-point decline in the adjusted EBITDA margin in the fiscal second quarter.
Management expects the declining trend in COVID-19 vaccinations to continue in fiscal 2023. This is in addition to a drop in COVID-19 at-home test kit revenues. As a result, the Zacks Rank #4 (Sell) company foresees $75 million of headwinds related to adjusted EBITDA for the remaining two quarters of fiscal 2023.
Other Financial Details
Albertsons ended the quarter with cash and cash equivalents of $266.1 million as of Sep 9, 2023. The company’s long-term debt and finance lease obligations totaled $7,810.8 million, while total stockholders' equity amounted to $2,216.6 million.
Shares of Albertsons have lost 16.8% in the past year compared with the industry's decline of 23.8%.
3 Red-Hot Stocks
We have highlighted three better-ranked stocks, namely Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) , Ross Stores Inc. (ROST - Free Report) and Walmart Inc. (WMT - Free Report) .
Ollie's Bargain Outlet is a value retailer of brand-name merchandise at drastically reduced prices. The company currently 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 Ollie's Bargain Outlet’s current fiscal-year sales and EPS suggests growth of 14.1% and 67.3%, respectively, from the year-ago reported figures. OLLI has a trailing four-quarter earnings surprise of 1.3%, on average.
Ross Stores is an off-price retailer of apparel and home accessories. The company currently flaunts a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Ross Stores’ current fiscal-year sales and EPS suggests growth of 7.1% and 19.4%, respectively, from the year-ago reported figures. ROST has a trailing four-quarter earnings surprise of 11.4%, on average.
Walmart, which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Walmart’s current fiscal-year sales and earnings suggests growth of 5% and 2.2%, respectively, from the year-ago reported numbers. WMT has a trailing four-quarter earnings surprise of 11.6%, on average.
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Albertsons (ACI) Q2 Earnings Beat Estimates, Sales Rise Y/Y
Albertsons Companies, Inc. (ACI - Free Report) reported second-quarter fiscal 2023 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. While the top line improved from the year-ago period, the bottom line declined.
ACI's commitment to improving in-store services, strengthening digital and omni-channel features, and boosting productivity has played a significant role in its positive performance.
In the fiscal second quarter, the company remained steadfast in its commitment to implementing the Customers for Life transformation strategy and achieved robust operational results despite escalating macro-economic challenges.
Albertsons Companies, Inc. Price, Consensus and EPS Surprise
Albertsons Companies, Inc. price-consensus-eps-surprise-chart | Albertsons Companies, Inc. Quote
Q2 Performance in Detail
Albertsons, which entered an “Agreement and Plan of Merger” with Kroger on Oct 13, 2022, posted adjusted quarterly earnings of 63 cents a share, which comfortably surpassed the Zacks Consensus Estimate of 57 cents. However, the bottom line declined from the 72 cents reported in the prior-year period.
Net sales and other revenues were $18,290.7 million, up 2.1% year over year. The top line beat the Zacks Consensus Estimate of $18,203 million. The upside was driven by a 2.9% rise in identical sales, with retail price inflation, growth in pharmacy and increasing digital penetration contributing to the metric. Top-line growth was partly offset by lower fuel sales. Impressively, digital sales rose 19% year over year in the quarter.
The gross profit amounted to $5,041.5 million, up 0.7% year over year. However, the gross margin contracted 30 basis points to 27.6%. We expected a year-over-year decline of 10 basis points in the gross margin for the quarter under review.
Excluding the impacts of fuel and LIFO expenses, the gross margin rate decreased 37 basis points from the second quarter of fiscal 2022. This decline was primarily driven by the robust growth in pharmacy operations, which generally have a lower gross margin rate, and an increase in shrink. These were partially offset by the company’s efforts to enhance procurement and sourcing productivity.
Image Source: Zacks Investment Research
Selling and administrative expenses rose 2.4% year over year to $4,595.5 million. As a percentage of net sales and other revenues, selling and administrative expenses increased 10 basis points to 25.1%. Excluding the impacts of fuel, selling and administrative expenses, as a percentage of net sales and other revenues, decreased 8 basis points. The reduction was primarily due to decreased employee costs, which also encompassed the advantages resulting from our continuous productivity initiatives. We anticipated a year-over-year increase of 2.5% in selling and administrative expenses.
Adjusted EBITDA decreased 6.8% to $976.9 million. Meanwhile, the adjusted EBITDA margin contracted 60 basis points to 5.3% on a year-over-year basis. The decline in adjusted EBITDA can be attributed to the company’s fuel business and fewer COVID-19 vaccinations in the quarter. We also expected a 60-basis-point decline in the adjusted EBITDA margin in the fiscal second quarter.
Management expects the declining trend in COVID-19 vaccinations to continue in fiscal 2023. This is in addition to a drop in COVID-19 at-home test kit revenues. As a result, the Zacks Rank #4 (Sell) company foresees $75 million of headwinds related to adjusted EBITDA for the remaining two quarters of fiscal 2023.
Other Financial Details
Albertsons ended the quarter with cash and cash equivalents of $266.1 million as of Sep 9, 2023. The company’s long-term debt and finance lease obligations totaled $7,810.8 million, while total stockholders' equity amounted to $2,216.6 million.
Shares of Albertsons have lost 16.8% in the past year compared with the industry's decline of 23.8%.
3 Red-Hot Stocks
We have highlighted three better-ranked stocks, namely Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) , Ross Stores Inc. (ROST - Free Report) and Walmart Inc. (WMT - Free Report) .
Ollie's Bargain Outlet is a value retailer of brand-name merchandise at drastically reduced prices. The company currently 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 Ollie's Bargain Outlet’s current fiscal-year sales and EPS suggests growth of 14.1% and 67.3%, respectively, from the year-ago reported figures. OLLI has a trailing four-quarter earnings surprise of 1.3%, on average.
Ross Stores is an off-price retailer of apparel and home accessories. The company currently flaunts a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Ross Stores’ current fiscal-year sales and EPS suggests growth of 7.1% and 19.4%, respectively, from the year-ago reported figures. ROST has a trailing four-quarter earnings surprise of 11.4%, on average.
Walmart, which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Walmart’s current fiscal-year sales and earnings suggests growth of 5% and 2.2%, respectively, from the year-ago reported numbers. WMT has a trailing four-quarter earnings surprise of 11.6%, on average.