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Albertsons reports Q3 results

Albertsons' net sales and other revenue was $18.6 billion during the third quarter compared to $18.2 billion during the prior year period.
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Despite a challenging economic environment, Albertsons reported strong results for the third quarter of fiscal 2023, which ended Dec. 2, 2023.

Vivek Sankaran, CEO, said, "We delivered another solid quarter amidst a challenging economic backdrop. We want to thank all our teams for their commitment to serving our customers and communities. As we look ahead, our ambition is to create Customers for Life, in part through our focus on operational excellence in our stores, driving growth in our digital and pharmacy operations, and deepening our relationships with our customers."

Sankaran continued, "While we are benefiting from our productivity initiatives, we expect to continue to see the impacts of investments in associate wages and benefits, cycling significant prior year food inflation, customers receiving less government assistance, the resumption of student loan payments and other types of payment deferrals, inflationary cost increases and the outsized growth of our pharmacy and digital businesses as we continue to lean into increased customer engagement in our Customers for Life strategy."

Albertsons' net sales and other revenue was $18.6 billion during the quarter compared to $18.2 billion during the prior year period. The increase was driven by the company's 2.9% increase in identical sales, with strong growth in pharmacy sales driving the identical sales increase. The Boise, Idaho-based retailer also continued to grow its digital business with a 21% sales increase during the third quarter of fiscal 2023. Loyalty members increased 17% to 38.5 million.

[Read more: Albertsons named Drug Store News Pharmacy Innovator of the Year 2022]

Albertsons' gross margin rate decreased to 28% during the third quarter of fiscal 2023 compared to 28.2% during the third quarter of fiscal 2022. Excluding the impact of fuel and LIFO expense, gross margin rate decreased 64 basis points compared to the third quarter of fiscal 2022. The strong growth in pharmacy operations, which carries an overall lower gross margin rate, and increases in shrink were the primary drivers of the decrease. The decrease was partially offset by the company's procurement and sourcing productivity initiatives, Albertsons said. The rate decrease related to pharmacy operations was primarily due to growth in pharmacy sales and a lower margin rate on COVID-19 vaccines in the third quarter of fiscal 2023. In addition, the benefits from the company's productivity initiatives allowed Albertsons to continue to provide incremental targeted price investments to its customers during the third quarter of fiscal 2023.

The retailer's selling and administrative expenses decreased to 24.8% of net sales and other revenue during the third quarter of fiscal 2023 compared to 25% during the third quarter of fiscal 2022. Excluding the impact of fuel, selling and administrative expenses as a percentage of Net sales and other revenue decreased 28 basis points. The decrease in selling and administrative expenses as a percentage of net sales and other revenue was primarily attributable to lower employee costs, which includes the benefit of ongoing productivity initiatives, and lower depreciation and amortization, partially offset by an increase in operating expenses related to the expansion of Albertsons' digital and omnichannel capabilities, ongoing merger-related costs, increased store occupancy costs and additional third-party store security services, the company said.

Other income, net was $6.7 million during the third quarter of fiscal 2023 compared to other expense, net of $1.7 million during the third quarter of fiscal 2022.

[Read more: Albertsons offers pet parents money-saving prescriptions, healthcare services]

Net income was $361.4 million, or 62 cents per share, during the third quarter of fiscal 2023. Net income was $375.5 million, or 20 cents per share, during the third quarter of fiscal 2022. Net income per share during the third quarter of fiscal 2022 includes a 45 cents per share reduction related to the special cash dividend of $6.85 per share attributable to holders of convertible preferred stock on an as-converted basis.

The retailer's adjusted net income was $462.3 million, or 79 cents per share, during the third quarter of fiscal 2023 compared to $505.1 million, or 87 cents per share, during the prior yeare period.

Albertsons' adjusted EBITDA was $1.1 billion, or 6% of Net sales and other revenue, during the third quarter of fiscal 2023 compared to $1.2 billion, or 6.4% of Net sales and other revenue, during the third quarter of fiscal 2022. 

[Read more: Albertsons offers pet parents money-saving prescriptions, healthcare services]

"As we look ahead to the fourth quarter of fiscal 2023, we expect continued outsized growth and margin impact in our pharmacy and digital operations," the company said.

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