Albertsons closes out fiscal 2022 on an up note

Albertsons Cos. built on strong prior-year sales and posted adjusted earnings per share at the high end of Wall Street’s estimates for its fiscal 2022 fourth quarter and full year.

For the 12 weeks ended Feb. 25, net sales and other revenue totaled $18.27 billion, up 5.1% from $17.38 billion a year earlier, when the top line rose 10.2%, Albertsons reported Tuesday. The Boise, Idaho-based food and drug retailer attributed the gain to a 5.6% increase in identical sales, which came atop a 7.5% increase a year ago.

Albertsons said retail price inflation, pharmacy sales growth and higher digital penetration contributed to the ID sales increase. The company also noted that membership in its Just for U loyalty program expanded by 15% in Q4 to more than 34 million.

Full-year 2022 net sales and other revenue climbed 8% to $77.65 billion from $71.89 billion in fiscal 2021, when Albertsons tallied a 3.2% increase. Identical sales for fiscal 2022 grew 6.9% after a 0.1% dip in 2021.

“We are pleased with our fourth-quarter financial results and the suite of capabilities we continue to build in our business,” Albertsons CEO Vivek Sankaran said in a statement. “We want to thank all our teams for their commitment to bringing people together around the joys of food and inspiring well-being, and for serving our customers and communities.”

On the e-commerce side, Albertsons saw continued robust growth, with digital sales up 16% in Q4 and 28% for the full year, compared with 5% gains for both periods the year before.

“These results, and our results for fiscal 2022 overall, were fueled by the rollout of our ‘Customers for Life’ transformation strategy, which places the customer at the center of everything we do, with the ultimate goal of supporting them every day, every week, and for a lifetime,” Sankaran commented. “Against this backdrop, throughout the year, we invested in the following initiatives: digitally connecting and engaging our customers through a frictionless omnichannel experience, differentiating our store experience, enhancing what we offer and where we offer it, modernizing our operational capabilities, and further embedding ESG throughout our operations.”

After 5% increases a year ago, Albertsons reported digital sales gains of 16% in the fourth quarter and 28% for the full year in fiscal 2022. / Photo: Shutterstock

At the bottom line, Albertsons posted fiscal 2021 fourth-quarter net income of $311.1 million, or 54 cents per diluted share, compared with $455.1 million, or 79 cents per diluted share, in fiscal 2021. The 2022 quarter included a $43.5 million, or 7 cents per share, benefit related a reduction in reserves for uncertain tax positions, while the 2021 quarter reflected a $78.7 million, or 14 cents per share, gain (net of tax) from the company’s combined withdrawal from union pension plans.

Adjusted net earnings in the 2021 quarter were $459.7 million, or 79 cents per diluted share, versus $436.8 million, or 75 cents per diluted share, in the 2021 quarter. Analysts, on average, had forecast adjusted earnings per share (EPS) of 67 cents, with estimates ranging from 52 cents to 78 cents, according to Refinitiv.

Albertsons’ full-year 2022 net income totaled $1.51 billion, or $2.27 per diluted share, compared with $1.62 billion, or $2.70 per diluted share, in 2021. On an adjusted basis, fiscal 2022 net earnings came in at $1.97 billion, or $3.37 per diluted share, versus $1.78 billion, or $3.07 per diluted share, for 2021. Analysts’ consensus estimate was for adjusted EPS of $3.26, with projections running from $3.10 to $3.45.

Due to the pending $24.6 billion deal to be acquired by The Kroger Co., announced in October, Albertsons isn’t issuing fiscal-year guidance or holding a conference call fiscal 2022 results.

“As we look ahead to fiscal 2023, we believe we are well-positioned to drive top-line growth by deepening relationships with our customers even as inflation continues. However, we also believe that the economic backdrop is uncertain and is likely to be more challenging later in the year,” Sankaran stated. “We have prepared our business for a more difficult consumer environment and are expecting significant labor investments and inflationary cost increases. Additionally, we expect further declines in COVID-19 vaccination and at-home test kit revenue. These headwinds are expected to be partially offset by the ongoing growth in our core business and the benefits from the next phase of our productivity initiatives.”

For fiscal 2022, Albertsons said it totaled capital expenditures of $2.15 billion, mainly for digital and technology platform investments and, on the brick-and-mortar side, 173 store remodels and five new store openings.

Albertsons finished fiscal 2022 with 2,271 retail stores, including 1,722 pharmacies, compared with 2,276 stores and 1,722 pharmacies a year ago. The company operates stores in 34 states and the District of Columbia under 24 banners, including Albertsons, Safeway, Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets and Balducci’s Food Lovers Market, as well as 401 fuel centers, 22 distribution centers and 19 manufacturing plants.

Though Albertsons didn't hold a conference call with analyst, CFRA Research analyst Arun Sundaram noted the guarded outlook in Sankaran's prepared remarks.

"Albertsons did not provide formal guidance but did state that it has prepared its business for a more difficult consumer environment and is expecting significant labor investments and inflationary cost increases this year," Sundaram wrote in a research note on Tuesday. "With food inflation now moderating, we expect identical sales in fiscal 2024 to grow in the low-single-digit range, compared to the 6.9% growth it experienced in fiscal 2023. Weaker identical-sales growth combined with labor investments and cost increases will make it difficult to leverage operating expenses, in our opinion."

*Editor's Note: Article updated with analyst comment.