Albertsons (ACI) Q4 FY26 earnings call: guidance and Q&A

Can you provide more detail on the $2 billion productivity program, including the split between COGS and SG&A, and how it will be realized?

The $2 billion productivity program over the next 3 years will be ratable, primarily driven by store operations (including shrinkage and Rx), sourcing, and supply chain. The bulk of the savings is expected to come from the SG&A side of the business, amplified by AI big bets and 'buying better together' initiatives.

“Yes, we just reset our productivity to $2 billion over the next 3 years. You can think of that ratably over that period of time. And when you look at the big areas that, that comes out of, it's going to be our store operations, including shrinkage and Rx, you're going to see us buying better together. Sourcing, both GNFR and in the admin areas, we expect to see benefit supply chain. So we have amplified our activities in this area materially, and we feel very confident in the delivery of this new productivity target over the next 3 years.”

asked by Leah Jordan · answered by Sharon McCollam

Please provide more detail on the ID sales guide, specifically the outlook for grocery volumes and inflation throughout the year.

The reported ID sales guidance of 0% to 1% includes a 150 basis point headwind from the IRA, meaning the underlying business is closer to 1.5% to 2.5%. Industry units are expected to remain pressured, particularly in the first half, with Q1 tracking below the full-year range due to IRA and egg deflation. Sequential improvement is anticipated, with likely positive ID sales in the back half of the year.

“Yes. And Leah, your question is how do we see the cadence [ ex-Rx ] as we move through the year. We're expecting the industry units to remain pressured, particularly in the first half of the year and expect Q1, we said it will actually be below our guidance range in total, including IRA. And then we will have sequential improvement as we move through the year and expect likely to be positive in the back half.”

asked by Leah Jordan · answered by Sharon McCollam

Have you seen a step change in competitive pricing investments, and do you foresee a need for deeper investments in specific markets given your productivity initiatives?

Albertsons closed the pricing gap versus MULO in Q4. Their pricing approach is surgical, not broad-based, investing where it matters most for customer value perception (key value items, private label, loyalty). This is funded by structural productivity and margin improvement, protecting long-term gross margin growth, and they don't anticipate needing deeper investments beyond current plans.

“So a couple of things. First of all, we closed the gap on pricing versus MULO in the fourth quarter. So we are seeing improvements there. And I think we shared a year ago, we have a very different price position across the many markets that we operate in. So our approach is very surgical, not broad-based. We're investing where it matters most to customer value perception, especially in key value items on our private label, our own brands, and also through loyalty and personalization.”

asked by Mark Carden · answered by Susan Morris

Can you provide more color on the gross margin outlook for the upcoming year, considering various puts and takes?

In FY26, gross margin will benefit from the IRA. The digital business's continued growth will still impact mix, though less than before due to improved profitability. Productivity benefits are expected to offset surgical price investments. Overall, gross margin is anticipated to be flat to slightly better as the year progresses.

“Yes. So in 2026, we will continue to see benefit from the IRA. So you can anticipate that there will be a positive coming from that piece of it. On the mix shift side where we are seeing the digital business continue to grow, while less than previous years because of the improvement we're seeing in profitability in the digital business, it's still not running -- obviously, margins of the grocery business. So we see the digital mix still playing out. And the investments that we're making price and others, we've got the productivity to offset it. So we should see the margin flat to slightly better as we progress through the year in 2026.”

asked by Edward Kelly · answered by Sharon McCollam

How will the company fund share repurchases given increased CapEx and the opioid settlement, and what are the drivers of cash flow?

About half of the share repurchases are expected to be funded by improvements in working capital in FY26. The company is confident that investments in CapEx, particularly the '4 big bets,' will yield returns that accelerate working capital improvements in the second half of the year, maintaining a strong balance sheet and leverage position.

“Yes. So one area -- when you look at the big bets and you listen to the initiatives that are underlying our productivity, we are expecting in 2026, an improvement in working capital. And our guess would be that half of that probably will be funded by working capital improvements. In addition to that, we continue to believe that we are going to be able to take this CapEx and invest it, improve the store fleet, see the benefits in the back half of the year coming from the 4 big bets and be able to then at the back half of the year further accelerate working capital.”

asked by Edward Kelly · answered by Sharon McCollam

What are the key performance indicators for digital growth, what growth levels are targeted, and how is it impacting market share given industry unit pressure?

Digital penetration surpassed 10% in Q4 FY25, with 16% growth, 90% of which came from first-party business. Over half of digital orders are fulfilled in under 3 hours, and flash delivery is a fast-growing segment. While industry units are pressured, especially in lower-income cohorts, the focus is on converting proximity into preference through sharper value, stronger loyalty, and differentiated omnichannel experiences to drive growth and lifetime value.

“So we're very pleased with the results of our digital penetration. We shared on the call that it's now surpassed 10%. If sales grew 16% in the fourth quarter, but what's important to note there, it's over 40% to your stack. And by the way, we're not done. We think there's still a lot of upside there. We're excited about the growth. 90% of that roughly coming from our first party, which is very attractive for us because of the relationship with the customer and the data side.”

asked by Simeon Gutman · answered by Susan Morris

How did own brand perform in Q4 FY25 relative to the rest of the store, and what are the assumptions for own brand penetration in FY26?

Own brand penetration is currently fairly flat but is a top priority for FY26. The company has made significant investments in restructuring the team and improving cost negotiation to amplify own brand offerings. Increasing own brand penetration is a primary initiative for driving value and is expected to grow throughout 2026.

“So on brand, as we mentioned before, we're seeing fairly flat penetration at this moment in time, but it's one of our top priorities as we move forward into 2026. We've made some pretty significant investments in restructuring the team, in cost negotiation improvements, while also amplifying -- we're certainly protecting the quality that we have. So one of our primary initiatives in terms of driving value now and through the rest of 2026 is absolutely increasing own brand penetration.”

asked by Paul Lejuez · answered by Susan Morris