Albertsons Cos. released its fourth quarter and full-year earnings, while announcing a reconfigured joint plan of divestiture with C&S Wholesale Grocers related to the proposed Kroger and Albertsons merger.
The updated divestiture proposal increases the total store spinoff by 166. The divesture under the new plan totals 579 stores that Kroger and Albertsons would sell to C&S as they continue their merger initiative.
Under the updated plan, C&S also will acquire the Haggen banner, adding a fourth brand to the three — QFC, Mariano’s and Carrs — already incorporated in the deal with Albertsons and Kroger. Stores currently under the four banners will be subject to re-branding into one of the retained Kroger or Albertsons banners following the close of the transaction with C&S.
As part of the amended agreement, C&S will license the Albertsons banner in California and Wyoming and the Safeway banner in Arizona and Colorado. In these states, Kroger will re-banner the retained Albertsons- and Safeway-bannered stores following the merger closing. Kroger will maintain the Albertsons and Safeway banners in the remaining states in which they operate.
In the first quarter, Albertsons net income was $250.5 million, or 43 cents per diluted share, versus $311.1 million, 54 cents per diluted share, in the year-earlier period. Adjusted for one-time events, net income was $318 million, or 54 cents per diluted share, versus $459.7 million, or 79 cents per share, in the year-prior quarter.
Adjusted diluted earnings per share managed to beat a Yahoo Finance-published analyst consensus estimate, which was 52 cents, but sales fell short of a $18.47 billion estimate.
Net sales were $18.34 billion versus $18.27 billion in the year-previous quarter, the company reported. Operating income was $426.2 million versus $433.6 million in the year-before period.
Identical sales increased 1% in the quarter year over year, while digital sales increased 24%.
For the full fiscal year, net income was $1.3 billion, or $2.23 per diluted share, versus $1.51 billion, or $2.27 per diluted share, in the year earlier. Adjusted net income was $1.69 billion, or $2.88 per diluted share, versus $1.97 billion, or $3.37 per diluted share, in the year prior.
Net sales were $79.24 billion versus $77.65 billion in the year previous, Albertsons noted. Operating income was $2.07 billion versus $2.31 billion the year before.
“We delivered another solid quarter amidst a difficult industry backdrop,” said Albertsons CEO Vivek Sankaran. “Again this quarter, we focused on our strategy to create Customers for Life, which drove strong growth in digital and pharmacy, deepened our omnichannel relationships with our customers and improved our in-store experience. We are pleased with our fiscal 2023 financial results, particularly in omnichannel, where we have increased our investments in technology, digital and in-store customer experience and supply chain operations.
As it considers the year ahead, Sankaran said, Albertsons looks forward to fiscal 2024, during which the company “will continue investing in our Customers for Life strategy and developing the digital and omnichannel capabilities necessary to support it. Our Customers for Life strategy is placing the customer at the center of everything we do, with the ultimate goal of supporting them every day, every week and for a lifetime.
Sankaran added, “It is a multi-year journey that we will continue to build on in fiscal 2024 as we invest in capabilities that allow us to digitally connect and further engage our customers through a frictionless omnichannel experience, enhance what we offer, modernize our operational capabilities and transform our ways of working. At the same time, we expect to face ongoing headwinds posed by investments in associate wages and benefits, cycling significant prior-year food inflation, lower government assistance for our customers, declining COVID-related income, and the increasing mix of our pharmacy and digital businesses, which carry lower margins. We expect these headwinds to be much stronger in the first half of fiscal 2024. These headwinds are expected, however, to be partially offset by ongoing productivity initiatives.”
The changes in the Kroger and Albertson asset sales agreement with C&S Wholesale Grocers, a deal originally announced on October 14, 2022, respond to concerns raised by Federal and state antitrust regulators regarding the original agreement. The companies believe the amended divestiture package will improve their position as regards regulatory challenges to the proposed merger, including pending court proceedings.
By location, Kroger stated the number of stores contained in the divestiture is:
- Washington, 124 Albertsons Cos. and Kroger stores.
- California, 63 Albertsons Cos. stores.
- Colorado, 91 Albertsons Cos. stores.
- Oregon, 62 Albertsons Cos. and Kroger stores.
- Texas/Louisiana 30 Albertsons Cos. stores.
- Arizona, 101 Albertsons Cos. stores.
- Nevada, 16 Albertsons Cos. stores.
- Illinois, 35 Albertsons Cos. and Kroger stores.
- Arkansas, 18 Albertsons Cos. stores.
- Idaho, 10 Albertsons Cos. stores.
- New Mexica, nine Albertsons Cos. stores.
- Montana/Utah/Wyoming, 11 Albertsons Cos. stores.
- Maryland/Virginia/Delaware/Washington, DC, nine Harris Teeter stores.
