Grocery retailer Albertsons (NYSE: ACI) met Wall Streets revenue expectations in Q3 CY2025, with sales up 2% year on year to $18.92 billion. Its non-GAAP profit of $0.44 per share was 10.6% above analysts’ consensus estimates.
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Albertsons (ACI) Q3 CY2025 Highlights:
- Revenue: $18.92 billion vs analyst estimates of $18.88 billion (2% year-on-year growth, in line)
- Adjusted EPS: $0.44 vs analyst estimates of $0.40 (10.6% beat)
- Adjusted EBITDA: $848.4 million vs analyst estimates of $825 million (4.5% margin, 2.8% beat)
- Adjusted EPS guidance for the full year is $2.12 at the midpoint, missing analyst estimates by 1.2%
- EBITDA guidance for the full year is $3.85 billion at the midpoint, in line with analyst expectations
- Operating Margin: 1.6%, in line with the same quarter last year
- Locations: 2,257 at quarter end, down from 2,267 in the same quarter last year
- Same-Store Sales rose 2.2% year on year, in line with the same quarter last year
- Market Capitalization: $8.84 billion
StockStory’s Take
Albertsons’ third quarter was met with a negative reaction from the market as management pointed to a consumer environment marked by pressures across income segments and continued caution in discretionary spending. CEO Susan Morris highlighted the company’s focus on targeted price investments and scaling digital engagement to offset macroeconomic challenges, while President and CFO Sharon McCollam noted sequential improvements in core grocery categories due to these actions. Management characterized the competitive landscape as increasingly promotional, but emphasized that their loyalty and AI-driven personalization helped drive resilience. Morris described the performance as evidence of Albertsons’ ability to “execute with discipline and urgency” despite industry and policy headwinds.
Looking ahead, Albertsons’ guidance is shaped by its ongoing investment in technology, digital platforms, and productivity initiatives, with management expecting these strategies to drive future profitability. The company is placing emphasis on scaling AI across merchandising, supply chain, and labor management to unlock cost efficiencies and enhance customer experience. Morris stated, “Our ambition is for customers to truly feel seen, to reliably find the essentials they need at prices they trust, while also discovering unique inspiring items that make our stores a destination.” Management also acknowledged that regulatory changes, such as the Inflation Reduction Act’s impact on Medicare drug pricing, would present top-line headwinds but are expected to be neutral to the bottom line.
Key Insights from Management’s Remarks
Management cited digital sales momentum, pharmacy growth, and cost productivity as key drivers of Q3 results, while continuing to prioritize technology transformation and targeted pricing strategies.
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Digital sales acceleration: Digital sales rose 21% year over year, supported by the adoption of new AI-powered tools such as the Ask AI shopping assistant, which management indicated is already increasing basket size among users by 10%. This reflects Albertsons’ focus on leveraging technology to deepen engagement and drive higher-value transactions.
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Pharmacy and health outperformance: The pharmacy business delivered another quarter of strong growth, attributed to robust immunization uptake, GLP-1 therapies, and core prescription volumes. Management emphasized that pharmacy customers who also shop for groceries are significantly more valuable, contributing to higher lifetime value.
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Loyalty and customer engagement: Loyalty program membership grew 12% to over 49 million, with enhancements to the program driving increased transaction frequency and spend. The integration of digital and loyalty platforms is enabling more personalized promotions and cross-channel engagement.
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Targeted price investments: Morris described a strategic, data-driven approach to pricing, with selective price reductions in key categories leading to sequential improvements in unit trends, particularly where new low-price campaigns were launched. These efforts are designed to balance customer value with margin preservation.
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Cost productivity initiatives: Albertsons delivered lower selling and administrative expenses driven by ongoing productivity and automation efforts. The company is targeting $1.5 billion in productivity gains over three years, with visible benefits already supporting reinvestment in digital and customer value propositions.
Drivers of Future Performance
Albertsons expects future performance to be driven by continued investment in digital, AI, and productivity, amid an uncertain consumer landscape and regulatory headwinds.
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AI and tech transformation: Management is scaling AI across merchandising, labor, and supply chain operations, aiming to improve efficiency and unlock new profit pools. These initiatives are expected to drive structural cost advantages and enhance the customer experience, with early results from digital tools already showing increased basket size and engagement.
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Pharmacy and regulatory impacts: Growth in the pharmacy segment continues to be a priority, with immunization and GLP-1 therapies as key drivers. However, management highlighted that the Inflation Reduction Act will create a significant headwind for reported pharmacy sales, estimated at a 125-basis-point drag on comparable store sales next year, but noted that the impact to profit is expected to be neutral.
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Competitive pricing and consumer trends: The company anticipates a more promotional environment as competitors intensify price investments. Albertsons plans to maintain a surgical, data-driven approach to pricing and value, focusing on loyalty and own brands to mitigate ongoing volume and margin pressures.
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will monitor (1) the adoption and profitability trajectory of digital and AI-powered initiatives, (2) the impact of regulatory changes, such as the Inflation Reduction Act, on pharmacy sales and comp-store trends, and (3) execution of cost productivity programs—especially as Albertsons targets $1.5 billion in cumulative gains. Updates on store network optimization and the pace of loyalty membership growth will also serve as important indicators of strategic progress.
Albertsons currently trades at $16.10, down from $17.16 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).
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