‘Our Mojo Is Back’: Albertsons Expects ‘Gradual and Incremental’ Top Line Improvements in Grocery

Following its failed mega-merger with Kroger, Albertsons Companies, Inc. is entering fiscal 2025 with positive momentum and expectations that it will improve top-line trends in its grocery business in the back half of the year.

The Idaho-based grocery chain’s confidence is, in part, rooted in its better-than-projected Q4 2024 earnings report released today. Net sales and other revenue were $18.8 billion in the quarter ending February 22, up from $18.3 billion last year, driven by an increase in identical sales attributed to Albertsons’ pharmacy business.

“We have stayed true to our customers, invested in strengthening our business, and [advanced] our Customers for Life strategy. This strategy has firmly positioned the company for its next chapter of growth and value creation for our shareholders,” said outgoing CEO Vivek Sankaran during this morning’s earnings call.

He continued, “Within the few months since the termination of the merger, our mojo is back. We are executing once again like we used to.”

To engage customers, Albertsons has continued to focus on growth through four digital platforms: ecommerce, loyalty, pharmacy and health and the integration of its mobile app for use in-store. The company’s ecommerce penetration now accounts for more than 8% of grocery revenue, with its top-performing markets at over 10%.

Last year, the grocery chain streamlined its “for U” loyalty program to enhance member experience and provide greater value. The system now features a single points-based system, double the time to earn points and an automatic cash-off option.

The strategic decision has been fruitful. In the quarter, loyalty membership grew more than 15% year-over-year to more than 45 million consumers and actively engaged customers increased 12%.

The uptick in loyalty members comes as cash-strapped consumers increasingly seek value, often downtrading to private label. To address these needs, Albertsons has worked with vendor partners to lower prices in certain categories and markets and “enhanced the breadth of [its] loyalty offerings to provide immediate savings.” During the quarter, the retailer launched new items in its Open Nature cauliflower crust pizza line and its Signature Select ice cream assortment.

“From a competitive perspective, I think like the rest of the industry, we’re all seeing the pressures from mass and club stores’ value players,” said incoming CEO Susan Morris, who is slated to take the reins on May 1 when Sankaran retires. Still, Albertsons claims its consumer traffic is up and that it has share growth in several markets.

In Q4, the grocery chain’s gross margin rate fell to 27.4%. Excluding the impact of fuel and LIFO expenses, gross margin rate decreased 45 basis points compared to Q2 2023, primarily fueled by the aforementioned strong pharmacy sales.

Selling and administrative expenses were flat at 25.7% of net sales. Excluding the impact of fuel, the expenses as a percentage of net sales and other revenue decreased five basis points. The decline was primarily attributable to a drop in merger-related costs and the leveraging of employee costs.

Like many other companies, Albertsons is grappling with the potential impacts of looming tariffs on its business. The grocery chain procures 90% of its products domestically, so it’s in a “very different position than some of the competitors set out there,” per Morris, but it has still “deployed a task force to help understand the complexities of the situation as it evolves.”

Looking ahead, the company expects identical sales growth in the range of 1.5% to 2.5% and adjusted EBITDA in the range of $3.8 billion to $3.9 billion, including approximately $65 million related to the company’s 53rd week, in fiscal 2025.