Albertsons Companies Inc - Class A

Albertsons delivered a solid second quarter of fiscal 2024, topping Wall Street expectations on both the top and bottom lines even as underlying profitability continued to erode. The grocery chain posted adjusted EPS of $0.51, beating the $0.48 consensus by 6.25%, while revenue of $18.55 billion edged past the $18.48 billion estimate and grew 1.4% year over year, lifted by a 2.5% rise in identical sales and a 24% surge in digital revenue. The stronger-than-expected showing came despite meaningful margin pressure, as adjusted EBITDA slipped to $900.60 million, or 4.9% of revenue, from $976.90 million a year ago, weighed down by a richer mix of lower-margin pharmacy sales, higher picking and delivery costs, and $67.40 million in merger-related expenses tied to the pending Kroger transaction. Looking ahead, management cautioned that wage investments, a growing pharmacy and digital mix, and a more competitive retail environment will continue to pressure results, with productivity initiatives expected to only partially offset those headwinds.