Albertsons Posts Mixed Q3 Results Amid Digital Growth and Margins Pressure

Albertsons Companies, Inc. (NYSE: ACI) disclosed its financial results for the third quarter of fiscal 2025, covering the 12-week period ending November 29, 2025. Adjusted earnings per share (EPS) were reported at 72 cents, exceeding the analyst consensus estimate of 68 cents. Nonetheless, the company’s net sales and other revenue increased modestly by 1.9% to $19.123 billion, slightly below the expected $19.169 billion. Net income attributable to Albertsons shareholders showed a decline compared to the previous year, registering $293.3 million or 55 cents per share, down from $400.6 million or 69 cents per share in the third quarter of fiscal 2024. Adjusted net income, which excludes certain items, stood at $390.3 million or 72 cents per share, marginally higher than the previous year’s adjusted net income of $420.3 million, which was 71 cents per share. The company's adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) amounted to $1,038.7 million, equating to 5.4% of net sales and other revenue. This figure reflects a slight decrease when compared to $1,065.1 million, or 5.7%, reported in the same quarter a year earlier. From an operational perspective, Albertsons noted a 2.4% increase in identical sales, indicating growth in stores open at least one year. Remarkably, digital sales surged 21%, accompanied by a 12% increase in loyalty program members, reaching a total of 49.8 million. The management highlighted that a temporary government shutdown, which delayed Supplemental Nutrition Assistance Program (SNAP) funding, had a minor negative impact of approximately 10 to 20 basis points on identical sales during this quarter. The company’s gross margin rate declined to 27.4% from 27.9% in the prior-year quarter. This reduction was primarily attributed to increased delivery and handling expenses stemming from rapid digital channel growth, as well as robust expansion in pharmacy sales, which generally contribute a lower gross margin compared to other segments. Selling and administrative (S&A) expenses saw a slight decrease relative to net sales and revenue, dropping to 24.9% from 25.1% in the year-ago period. The company credited this improvement to better employee cost leverage and reduced merger-related costs. However, these gains were partially offset by rising business transformation costs tied to ongoing strategic initiatives. Income tax expenses significantly increased to $84.4 million this quarter, reflecting an effective tax rate of 22.3%. This is in contrast to the $14.5 million recorded in the corresponding quarter last year, which had benefited from one-time state tax audit settlements valued at $81.0 million. Albertsons’ liquidity position as of November 29, 2025, included cash and cash equivalents totaling $195.1 million. The company’s total debt, including finance leases, stood at $9,012.7 million. Operating cash flow for the first 40 weeks of fiscal 2025 amounted to $1,649.6 million, down from $1,922.1 million in the comparable period a year earlier. In commentary on the quarter, President and CEO Susan Morris emphasized the transformational role of technology and artificial intelligence investments. She stated, "Our investments in technology and AI are fundamentally reshaping how we operate and serve our customers; driving smarter decisions, greater efficiency, and more personalized experiences." Morris noted that the growth in digital and pharmacy channels, combined with disciplined execution and targeted investments, is enhancing Albertsons' competitive position and value proposition. Additionally, Albertsons declared a cash dividend for the fourth quarter of fiscal 2025 set at 15 cents per share. The dividend is payable on February 6, 2026, to shareholders on record as of January 23, 2026. Looking ahead, the company updated its fiscal 2025 full-year outlook. It forecasted identical sales growth between 2.2% and 2.5%, trimming the midpoint slightly below its prior estimate range of 2.2% to 2.75%. Adjusted EBITDA is projected in a range of $3.825 billion to $3.875 billion. Moreover, adjusted EPS guidance was narrowed with the lower end raised from $2.06 to $2.08, and the upper end reduced from $2.19 to $2.16. These adjustments position the anticipated earnings per share within a range surrounding the consensus Street estimate of $2.14. The revised outlook incorporates an expected negative impact of 16 to 18 basis points on annual fiscal 2025 performance, or 65 to 70 basis points in the fourth quarter alone, due to the Inflation Reduction Act’s Medicare Drug Price Negotiation Program. Effective January 1, 2026, this program is anticipated to reduce pharmacy sales volumes and revenues. Following the release of these results and guidance updates, Albertsons’ stock traded down by approximately 0.64%, reaching $17.00 per share at the time of reporting.