On Tuesday, Telsey Advisory Group maintained a Market Perform rating on Albertsons (NYSE:ACI) Companies Inc. (NYSE: ACI), with a steady price target of $27.25. Albertsons showcased a solid first quarter for fiscal year 2024, posting an adjusted EBITDA of $1.18 billion, aligning with expectations. The company experienced a notable 1.4% increase in identical sales (ID sales), surpassing both the anticipated 0.5% and the FactSet consensus of 0.7%.
The boost in ID sales was attributed to several thriving segments within the company. The pharmacy sector saw a significant 14% surge, driven by heightened demand for GLP-1 drugs. Additionally, Albertsons' digital sales rose by 23%, and the loyalty program expanded by 15%, reaching 41.4 million members. However, the core grocery categories continued to face challenges, with non-perishable product sales dipping by 0.3%, although this was slightly mitigated by a 0.2% rise in fresh product sales.
The company's profitability metrics for the quarter showed some shifts. The adjusted EBITDA margin decreased by 60 basis points to 4.9%, which was anticipated. Gross margin saw a marginal increase of 7 basis points to 27.8%. Nevertheless, the core gross margin, which excludes fuel and LIFO considerations, fell by 22 basis points. This was attributed to the robust performance of the pharmacy business, which typically has a lower gross margin, along with increased shrink, and elevated costs associated with digital picking and delivery. These were partially balanced by efficiencies from sourcing and productivity efforts.
Albertsons' adjusted selling, general, and administrative (SG&A) expenses ratio, excluding depreciation, increased by 67 basis points to 22.9%. When excluding fuel, the rise was even sharper at 79 basis points. This uptick was due to investments in digital and omnichannel capabilities, rising store occupancy costs, and expenses for third-party store security services. These increases were partly counterbalanced by reductions in employee costs and the benefits from ongoing productivity initiatives. Despite these mixed results, the company is noted to have executed well in the first quarter of the fiscal year 2024.
In other recent news, Albertsons Companies Inc. has been the subject of various analyst notes. Roth/MKM upgraded Albertsons' stock from Neutral to Buy, setting a new price target at $24.00, based on an improved outlook for the company's pending deal due to a new divestiture package. The divestiture package includes 166 additional stores, reducing the risk associated with re-branding and increasing access to private labels.
On the other hand, RBC Capital maintained an Outperform rating on Albertsons' stock but reduced the price target to $22. This adjustment reflects a modest increase in same-store sales for 2024 and a revised 2024 adjusted EBITDA forecast for Albertsons to $4.0 billion. The firm also noted the potential impact of high inflation rates and the timing of productivity initiatives on the company's performance.
Evercore ISI, meanwhile, maintained its "In Line" rating and $22.00 price target for Albertsons. The firm highlighted Albertsons' ongoing customer retention strategies and anticipated growth in the pharmacy sector and loyal customer base. However, it also pointed out near-term challenges such as pharmacy mix pressures and issues with shrink and technology investments. These are recent developments that investors should take into account.
InvestingPro Insights
Albertsons Companies Inc. (NYSE: ACI) has demonstrated resilience in its first quarter of fiscal year 2024, with a notable performance in its pharmacy sector and digital sales. InvestingPro data underscores this with a robust market capitalization of $11.66 billion and a compelling price-to-earnings (P/E) ratio of 8.95, indicating the company is trading at a low earnings multiple. Additionally, Albertsons is trading near its 52-week low, suggesting potential value for investors considering entry points. The company's revenue for the last twelve months as of Q4 2024 stands at approximately $79.24 billion, with a gross profit margin of 28.4%, reflecting operational efficiency.
InvestingPro Tips reveal that Albertsons is a prominent player in the Consumer Staples Distribution & Retail industry, which could provide stability in volatile markets due to the essential nature of its offerings. Moreover, the stock generally trades with low price volatility, which might appeal to investors seeking less turbulent assets. For those looking to delve deeper into Albertsons' financial health and market position, InvestingPro offers additional tips that can be accessed with a subscription. Use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and discover 6 more InvestingPro Tips that can help inform your investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.