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Predicting that food inflation will continue to decline, Albertsons CEO Vivek Sankaran delivered a solid second quarter earnings report for the Idaho-based grocer.
Identical sales increased 2.9% year-over-year, and net sales and other revenue was slightly higher than a year ago at $18.3 billion ($17.9 billion Q2 2022).
Digital sales increased 19% while loyalty membership went up 17% to 37.4 million year-over-year.
Albertsons’ gross margin rate was down slightly at 27.6% compared to Q2 2022 (27.9%). Excluding the impact of fuel and LIFO (last in, first out) expense, the gross margin rate decreased 37 base points year-over-year. Strong growth in pharmacy operations, which carries an overall lower gross margin rate, and increases in shrink inventory were the primary drivers of the decrease. The rate decrease related to pharmacy operations was primarily due to growth in pharmacy sales and fewer COVID-19 vaccines in the second quarter of fiscal 2023.
Second quarter net income was also down vs. 2022 at $266.9 million, as was adjusted net income at $367.7 million. A year ago, those totals were $342.7 million and $418.3 million, respectively.
Adjusted EBITDA stood at $976.9 million compared to just over $1 billion in the second quarter 2022.
Part of the reason behind the year-over-year drop was a decline in COVID-19 vaccinations, and Albertsons expects less vaccinations moving forward.
“During the second quarter, we continued to execute against our ‘Customers for Life’ transformation strategy and drive solid operating results, despite increasing macroeconomic headwinds,” said Sankaran.
“We are also mindful of a more challenging economic backdrop, including declining federal and state government assistance and higher interest rates, and their effects on consumer spending and our business,” he said.
“We also expect slowing food inflation, ongoing labor investment, broad inflationary cost increases and significant declines in COVID-19 vaccination and test kit revenue,” he added. “We continue to partially offset these headwinds with the benefits of our productivity initiatives.”
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