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    ACI
    Earnings call· May 2026(Q1 FY27)

    Albertsons Companies, Inc. ACI

    Jul 23, 2026 Source

    Executive summary

    Albertsons Q1 FY27 — Strategic Reorganization and Value Investment Amidst Soft Demand

    Albertsons reported Q1 FY27 results below expectations, with identical sales declining 0.8% amidst broader pressures in its core business and a softer unit environment. In response, the company is accelerating execution and investing surgically in its customer value proposition, funded by a new operating model called ACI Edge, which centralizes merchandising and streamlines divisions to drive long-term performance. The updated FY26 outlook reflects a more challenging near-term demand environment and increased value investments, though confidence in long-term earnings power remains.

    Highlights

    5

    • Digital sales grew 13% with penetration increasing to 10.5%.

    • E-commerce business was profitable in Q1, demonstrating improved underlying economics.

    • Pharmacy delivered strong script, immunization, and clinical service growth.

    • Media business delivered strong growth in Q1, with on-site revenue up significantly year-over-year.

    • ACI Edge operating model expected to generate approximately $200 million of incremental annual run rate benefits.

    Concerns

    5

    • Identical sales declined 0.8% in Q1, below expectations.

    • Adjusted EBITDA was $1.013 billion, below expectations.

    • Adjusted EPS was $0.42 per share, below expectations.

    • Updated FY26 identical sales outlook lowered to negative 0.5% to negative 1.5%.

    • Updated FY26 Adjusted EBITDA outlook lowered to $3.55 billion to $3.625 billion.

    Guidance & targets

    11
    CategoryTargetConfidence
    Fiscal 2026 Identical Sales
    negative 0.5% to negative 1.5%
    high materiality
    Medium
    Fiscal 2026 Identical Sales excluding IRA impact
    0% to 1%
    high materiality
    Medium
    Fiscal 2026 Adjusted EBITDA
    $3.55 billion to $3.625 billion
    high materiality
    Medium
    Fiscal 2026 Adjusted EPS
    $1.75 to $1.85 per share
    high materiality
    Medium
    Fiscal 2026 Effective Income Tax Rate
    24% to 25%
    medium materiality
    High
    Fiscal 2026 Capital Expenditures
    $1.9 billion to $2 billion
    high materiality
    High
    Fiscal 2026 Share Repurchases
    $600 million
    medium materiality
    High
    ACI Edge Annual Run Rate Benefits
    $200 million
    medium materiality
    High
    ACI Edge Transition Costs
    $50 million
    low materiality
    High
    3-year Productivity Target
    $2 billion
    high materiality
    High
    Own Brands Sales Penetration
    30%
    medium materiality
    High

    Operational metrics

    18
    Digital sales growth
    13%
    Q1 FY27

    Digital and loyalty remain key drivers of both growth and customer engagement.

    Digital sales penetration
    10.5%
    Q1 FY27

    Digital sales grew 13% this quarter with penetration increasing nearly to 10.5%.

    E-commerce profitability
    profitable
    Q1 FY27

    Including both our first-party and third-party businesses, e-commerce was profitable in the first quarter.

    Pharmacy growth
    outsized growth
    Q1 FY27

    While reported sales results continue to be pressured by the Inflation Reduction Act and branded generic mix, we continue to see outsized script, immunization and clinical service growth.

    Pharmacy profitability
    profitable
    Q1 FY27

    Our pharmacy business is profitable on a stand-alone basis and continues to improve.

    Media business on-site revenue growth
    up significantlyyear-over-year
    Q1 FY27

    Our media business delivered strong growth in Q1 and with on-site revenue up significantly year-over-year, driven by increased monetization of both new and existing display placements.

    Productivity target achievement
    more than 1/3of 3-year $2B target
    FY26

    We are delivering against our productivity commitments and are on track to realize more than 1/3 of our 3-year $2 billion productivity target in fiscal 2026.

    Net debt to adjusted EBITDA ratio
    2.3x
    Q1 FY27

    Ended the quarter with a net debt to adjusted EBITDA ratio of 2.3x, a level that continues to provide ample financial flexibility.

    Share repurchases
    $225 millionunder existing $2 billion authorization
    Q1 FY27

    returned more than $300 million to shareholders, including approximately $225 million of share repurchases under our existing $2 billion authorization

    Dividends paid
    $84 million
    Q1 FY27

    returned more than $300 million to shareholders, including approximately $225 million of share repurchases under our existing $2 billion authorization and $84 million in dividends.

    Capital expenditures
    $522 million
    Q1 FY27

    in Q1, we invested $522 million in capital expenditures related to the modernization of our store fleet, including 4 new stores as well as continued investment in our technology and AI capabilities.

    New stores opened
    4
    Q1 FY27

    invested $522 million in capital expenditures related to the modernization of our store fleet, including 4 new stores

    Gross margin rate
    26.6%down 23 bps YoY
    Q1 FY27

    The decrease in gross margin rate continues to be driven by the mix impact of outsized growth in digital sales, while productivity benefits mostly offset surgical investments in customer value.

    Adjusted SG&A
    approximately flat
    Q1 FY27

    In [dollars], our adjusted SG&A was approximately flat, reflecting the benefits of our productivity initiatives.

    Interest expense
    $167 millionincreased $25 million YoY
    Q1 FY27

    Q1 interest expense increased $25 million to $167 million. compared to $142 million last year due to higher borrowings and slightly higher average interest rates.

    Inflation Reduction Act impact
    100 bpsheadwind to identical sales
    Q1 FY27

    reported results were pressured by approximately 100 basis points from the impact of the Inflation Reduction Act

    Deflation impact
    50 bpsheadwind to identical sales
    Q1 FY27

    and 50 basis points from deflation.

    Inflation Reduction Act impact
    150 bpsexpected full year headwind
    FY26

    excluding the 150 basis point expected full year headwind from the pharmacy IRA.

    Industry KPIs

    8
    MetricValueDetails
    Sg a rate—%
    Gross margin drivers26.6%%
    Warehouse store club count4stores
    Comparable same store sales-0.8%%
    E commerce digital sales growth13%%
    Advertising retail media revenueup significantly
    Private label own brand penetration30%%
    Category level comps and inflation deflation50 bpsbps

    Product announcements

    2
    ProductTypeDetails
    Branded entertainment offering (shopper inform content)launch
    Commerce media capabilities (sponsored product discovery)expansion

    Risks & headwinds

    9
    Soft unit environmentNear-term, Q1 FY27 and FY26 outlook

    Identical sales declined 0.8% in Q1; FY26 identical sales outlook lowered to negative 0.5% to negative 1.5%

    Mitigation: Accelerating execution, surgically investing in customer value proposition, ACI Edge operating model.

    Pressure on lower-income consumersOngoing

    Most pronounced decline in units and basket in lower income customer segment.

    Mitigation: Personalized deals, loyalty program, price locks, offers to stretch basket, Own Brands.

    Inflation Reduction Act (IRA) impact on pharmacyQ1 FY27 and full year FY26

    100 bps headwind to identical sales in Q1; 150 bps expected full year headwind for FY26.

    Mitigation: Focus on outsized script, immunization, and clinical service growth.

    DeflationQ1 FY27

    50 bps headwind to identical sales in Q1.

    Mitigation: Investing in customer value proposition.

    Mix impact of outsized digital sales growth on gross marginQ1 FY27

    Gross margin rate declined 23 bps YoY (ex-fuel and LIFO) in Q1.

    Mitigation: Improving e-commerce economics through higher order density, better fulfillment productivity, and stronger customer engagement.

    Increased selling and administrative expensesQ1 FY27

    SG&A rate (ex-fuel) increased 42 bps YoY in Q1.

    Mitigation: Productivity initiatives (adjusted SG&A approximately flat in dollars), ACI Edge to leverage scale and improve sourcing effectiveness.

    Increased interest expenseQ1 FY27

    Interest expense increased $25 million to $167 million in Q1.

    Mitigation: Maintaining strong balance sheet, net debt to adjusted EBITDA of 2.3x provides financial flexibility.

    Supplier cost increasesH2 FY26

    Expected incremental pressure in H2 FY26.

    Mitigation: Pushing back on vendor partners, leveraging centralized merchandising for lower costs, absorbing some margin compression, using Own Brands to offer value.

    Geopolitical issues impacting market readabilityOngoing

    Not quantified, but makes it difficult to read unit trajectory.

    Mitigation: Planning prudently, focusing on internal actions to drive unit value and customer engagement.

    What to watch in Q2 FY27

    5

    Gross margin trajectory

    Next quarter (Q2 FY27) and H2 FY27
    CurrentQ1 FY27 gross margin rate (ex-fuel and LIFO) 26.6%, down 23 bps YoY.
    TargetQ2 FY27 similar to Q1, then modest improvement in H2 FY27.

    Why it matters

    Gross margin is under pressure from digital mix and value investments; its recovery is key to overall profitability.

    So just from a guide point of view, I want you to think about Q2 very similarly to Q1, including on a year-over-year basis as far as adjusted EBITDA goes. We're in the transformation. We're moving forward. Now when you get into Q3 and Q4, you're going to see in the back half, I'm going to give you like a look for the back half, it's going to improve. The year-over-year decline will improve a little bit in the back half for products -- for all the reasons we're talking about, some unit inflection, modest at improvement. And then, of course, the productivity that we'll bring in behind that. So you'll see a modest -- a little bit of an improvement in the back half.

    Q&A highlights

    5

    Seeking color on targeted price investments and whether the Board considered strategic alternatives given the tough backdrop and company valuation.

    Susan Morris stated price investments are targeted, market-specific, and funded by productivity, not broad-based discounting. She declined to disclose competitive index. Regarding strategic alternatives, she affirmed the primary goal is shareholder value and that the ACI Edge is the path forward, but the Board always considers all angles.

    “From a strategic alternative perspective, of course, we're always making sure that we're considering every angle when we think about delivering shareholder value, but that's not the primary discussion that we're having today.”

    asked by Edward Kelly · answered by Susan Morris

    2 min read6 chapters

    Detailed Narrative

    01

    ACI Edge Operating Model

    Albertsons introduced "ACI Edge," a new operating model transitioning from 11 divisions to 4 regions (California, West, South, East) and centralizing center store merchandising. This aims to create a faster, more connected platform, leveraging enterprise scale for sourcing, supply chain, technology, and talent, while empowering regions for local execution in fresh, service, and store standards. This model is expected to generate $200 million in incremental annual run rate benefits by FY27, with $50 million in transition costs over FY26-FY27.

    02

    Technology and AI Integration

    Technology and AI are foundational to ACI Edge, focusing on digital customer experience, merchandising intelligence, labor optimization, and supply chain optimization. AI-powered tools are being developed for conversational search, category planning, automated scheduling (enterprise-wide rollout by early 2027), and improved forecasting/replenishment. These initiatives are designed to strengthen and simplify operations, improve decision-making, and enhance productivity across the business.

    03

    Digital and Loyalty Performance

    Digital sales grew 13% in Q1, reaching 10.5% penetration, with the e-commerce business achieving profitability. Flash Delivery remains the fastest-growing segment, highlighting the strength of proximity advantage and fresh offerings. The loyalty ecosystem continues to scale personalization, driving increased frequency and higher average basket sizes among engaged members, supporting consistent top-line growth and customer lifetime value.

    04

    Pharmacy and Media Business Growth

    Pharmacy continues to be an important growth platform, showing outsized script, immunization, and clinical service growth despite sales pressure from the Inflation Reduction Act and generic mix shift. The pharmacy business is profitable standalone. The media business delivered strong Q1 growth, with on-site revenue significantly up year-over-year, driven by increased monetization and new offerings like branded entertainment and sponsored product discovery in AI-powered search.

    05

    Customer Value Proposition and Own Brands

    The company is accelerating investments in its customer value proposition across price, quality (Own Brands), personalization, convenience, and customer experience (fresh, food-forward offerings). Own Brands, including Signature Select, Lucerne, and O Organics, are key to delivering higher margins and customer value, with an aspiration to reach 30% sales penetration. These investments are strategically necessary to strengthen customer engagement and improve long-term business trajectory.

    06

    Productivity Initiatives

    Productivity remains foundational, with the company on track to realize over one-third of its 3-year $2 billion productivity target in fiscal 2026. The ACI Edge model is expected to uncover additional opportunities. These savings provide fuel for reinvestment into customer value, fresh execution, personalization, and digital convenience, aiming for sustainable growth and stronger earnings.

    AI-generated summary of the company’s earnings call. Not investment advice.