Albertsons reports Q2 fiscal 2023 results
Amid a challenging economic backdrop, in reporting results for its second quarter fiscal 2023, which ended Sept. 9, 2023, Vivek Sankaran, CEO of Albertsons, said, "During the second quarter, we continued to execute against our Customers for Life transformation strategy and drive solid operating results, despite increasing macro-economic headwinds. We want to thank all our teams for their commitment to our customers and communities."
Sankaran continued, "As we look ahead to the balance of the year, our focus remains the same – advancing operational excellence in our stores, driving growth in our digital and pharmacy operations, and deepening our relationships with our customers."
Sankaran concluded, "We are also mindful of a more challenging economic backdrop, including declining federal and state government assistance and higher interest rates, and their effects on consumer spending and our business. We also expect slowing food inflation, ongoing labor investment, broad inflationary cost increases and significant declines in COVID-19 vaccination and test kit revenue. We continue to partially offset these headwinds with the benefits of our productivity initiatives."
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Albertsons' net sales and other revenue was $18.3 billion during the second quarter of fiscal 2023 compared to $17.9 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, a 19% increase in digital sales, and retail price inflation across most categories being the primary contributors to the identical sales increase. The increase in net sales and other revenue was partially offset by lower fuel sales, the company said.
Albertsons also reported that its loyalty members increased 17% to 37.4 million.
The retailer's gross margin rate decreased to 27.6% during the second quarter of fiscal 2023 compared to 27.9% during the prior year period. Excluding the impact of fuel and LIFO expense, gross margin rate decreased 37 basis points compared to the second 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 fewer COVID-19 vaccines in the second quarter of fiscal 2023. In addition, the benefits from Albertsons' productivity initiatives allowed the company to continue to provide incremental price investments to its customers during the second quarter of fiscal 2023, the company noted.
Selling and administrative expenses increased to 25.1% of net sales and other revenue during the quarter compared to 25% during the second quarter of fiscal 2022. Excluding the impact of fuel, selling and administrative expenses as a percentage of net sales and other revenue decreased eight 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, partially offset by merger-related costs, an increase in operating expenses related to the expansion of Albertsons' digital and omnichannel capabilities, increased store occupancy costs and additional third-party store security services, Albertsons said.
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Albertsons' net income was $266.9 million, or 46 cents per share, during the second quarter of fiscal 2023. Net income was $342.7 million, or 59 cents per share, during the second quarter of fiscal 2022.
Adjusted net income was $367.7 million, or 63 cents per share, during the quarter compared to $418.3 million, or 72 cents per share, during the prior year period.
Adjusted EBITDA was $976.9 million, or 5.3% of net sales and other revenue, during the quarter compared to $1,048.5 million, or 5.9% of net sales and other revenue, during the second quarter of fiscal 2022. The decrease in adjusted EBITDA in the second quarter of fiscal 2023 was primarily due to a decrease in gross margin contribution from the company's fuel business and fewer COVID-19 vaccinations, Albertsons noted.
Albertsons said it expects a continued decline in demand for COVID-19 vaccinations and at-home test kits, resulting in an approximate $75 million headwind to adjusted EBITDA for the remaining two quarters of fiscal 2023.