Albertsons sales grow with higher pricing, COVID-19 vaccines, profit margin decreases

• Albertsons reported profit but said gross margin is slightly lower

• Shares tanked nearly 11% following the earnings, however, it is more than double since its IPO in June 2020

Supermarket chain Albertsons Co Inc on Tuesday reported better-than-expected earnings in the third quarter benefited from inflation-induced higher pricing and a boost of same-store sales for giving COVID-19 vaccines.

Although inflation helped the company in reporting better net income, the same factor weighed on profitability. Albertsons said its gross margin was slightly lower than a year earlier after excluding the impact of fuel price swings for the quarter ending in December.

U.S. inflation has topped 6.8% in November, the highest in 30 years, with food prices surging by 6.1% from the year earlier.

The result highlights the challenges which the supermarkets face as cost increases due to higher supply-chain costs, threatening to outlast a pandemic-era shift.

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However, the Boise, Idaho-based chain raised its guidance for the full year in its earnings statement and said it expects to report earnings excluding taxes in the range of $4.25 billion to $4.30 billion.

Financials

The company said its earnings were up 8.6% year over year at $16.73 billion, and adjusted profit was 79 cents a share, compared Wall Street revenue estimation of $16.06 billion and 59 cents a share of earnings.

Identical sales, a metric that measures the revenue generated from its existing stores, grew by 5.2%.

Since the pandemic, supermarkets such as Albertsons benefited from increased sales as consumers switched abruptly to eating more meals at home, as identical sales for the third quarter remained 18% higher than in the same stretch of 2019.

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In its financial outlook, Albertsons also lifted the same-store sales projection. The company said it expects a decline in identical sales by between 0.8% and 1.2% this year, compared to a drop of 2.5% to 3.5%, which the supermarket chain previously forecasted while considering shopping trends during the pandemic.

The company said it is now expecting adjusted earnings of $2.90 a share to $2.95 a share for the financial year 2021 ending in February, up from the previous guidance of $2.50 a share to $2.60 a share.

Share prices

Shares of Albertsons dropped nearly 11% on Tuesday to $28.40 in New York, as the investors see pressure on profit margins.

The shares of the Idaho-based company closed at $31.90 on Monday, which is more than doubled since the company listed itself on the New York Stock Exchange in June last year.

Picture Credit: CNBC