Albertsons: Inflation Boosts Q3 Revenue & Sales, While Margins Tighten

Adrianne DeLuca
Albertsons

Albertsons Companies released its quarterly earnings on Tuesday, reporting net sales and other revenue reached ​​$18.2 billion in Q3, a 1% increase from Q2 results, with growth largely driven by retail price inflation and higher fuel sales.

Despite rising sales, the retailer’s gross margin shrunk from 28.9% to 28.2% in the third quarter. According to the release, the decline is attributed to increases in product and supply chain costs, declining COVID-related revenue (such as vaccine administration), and rising picking and delivery costs. The margin impact was partially offset by higher at-home COVID test sales and cost-productivity initiatives.

“Our investments in digital transformation, differentiation in Own Brands and Fresh offerings, and the modernization of our operational capabilities contributed to these results,” said Vivek Sankaran, Albertsons Companies CEO, in a press release.

The report also highlighted increases in both identical (+7.9%) and digital sales (+33%); however, those results show a slight deceleration compared to Q2 growth. Selling and administrative expenses decreased to 25% of net sales in the quarter, largely due to productivity initiatives and sales leverage, but partially offset by market-driven wage increases, digital and omnichannel investments as well as costs related to its pending merger with Kroger.

“As we look ahead to the balance of the year and into fiscal 2023, we believe that all of these initiatives position us well to continue to drive top-line growth and deepen our customer and community engagement both online and in-store,” Sankaran said in the release. “At the same time, our ongoing productivity engine is expected to continue to support our investments and partially offset anticipated inflationary cost increases, declines in COVID-19 vaccination and at-home test kit revenue, and macro-consumer headwinds.”

Although Albertsons is looking to the year ahead, the company did not provide full-year financial guidance or host a conference call with investors in conjunction with its Q3 results due to its entry into the merger agreement with Kroger.

While the retailer did not provide any updates about the deal, it highlighted all events relative to the special dividend payment including the upcoming conference to review the Washington State Attorney’s General application for a preliminary injunction against the payment.