Facing inflation, halted food assistance benefits, reduced drug prices and belt-tightening from lower- and middle-income shoppers, Albertsons had a tough third quarter.
But it wasn’t all doom and gloom for the Boise, Idaho-based grocery retailer, which reported growth in its customer-loyalty program, e-commerce and pharmacy business.
Albertsons reported Jan. 7 that for the quarter ended Nov. 29, revenue increased 1.9% from the previous quarter to $19.12 billion.
The grocer’s identical store sales, or those locations that have been opened for more than a year, increased 2.4%, a development primarily driven by its pharmacy business.
The company reported earnings of 69 cents per share, beating consensus estimates of 63 cents per share. Revenue came in slightly below analyst predictions of $19.16 billion.
The report caused the company’s stock value to dip by nearly 6% over the course of trading day to $16.09.
Government shutdown of food assistance dented sales
Albertsons also faced headwinds from the government shutdown in Q3 that resulted in halted federal food assistance across the nation.
Low-income citizens enrolled in the Supplemental Nutrition Assistance Program (SNAP) received no or partial payments for the first two weeks in November during the longest government shutdown in US history.
Albertsons Chief Financial Officer Sharon McCollam said the government shutdown and resulting deferment of SNAP payments led to a 10- to 20-basis-point drop in identical store sales for the quarter.
Despite the delayed SNAP dollars, Albertsons has continued to improve unit growth through “surgical price investments,” according to CEO Susan Morris.
“We’re leaning into personalized promotion, loyalty enhancements and the surgical management of cost inflation to deliver immediate value while continuing selective price investments in key categories to support unit growth,” Morris said.
That growth comes at a time when lower-income shoppers are stretched thin and middle-income shoppers are experiencing financial stress.
“Middle-income households, which have been relatively resilient, are showing some signs of softening with increased price sensitivity and trade-down behavior emerging in certain categories,” Morris said. “At the high end, spending patterns remain largely stable, but even these customers are becoming more conscious of price and value, reflecting a broader shift towards cautious discretionary spending.”
Pharmacy ups and downs
The company continues to grow its pharmacy business in the wake of collapsing drugstore chains like Rite Aid, Walgreens and CVS. Albertsons operates 1,708 pharmacies across its 2,243-store footprint.
“In pharmacy and health, sales increased 18% as we delivered another strong quarter and deepened engagement through immunization and value-added services,” said McCollam.
Despite the strong growth in pharmacy, Albertsons faces headwinds from the passage of the Inflation Reduction Act, which has reduced prices on common drugs like insulin for those on Medicare.
“We’ve got this 65- to 70-basis-point impact that we are anticipating from the Inflation Reduction Act, drug pricing issue,” McCollam said, adding that the company is optimistic about the potential revenue from GLP-1 drugs in 2026.
