Albertsons Companies (ACI) Q2 2026 earnings review
Albertsons met its profit target, but it withdrew its outlook
Albertsons, which owns Safeway and Vons supermarkets, delivered the weak quarter it planned and then stopped giving forecasts. Sales at stores open a year ago slipped 0.8%, the same as last quarter. Profit before interest, taxes and depreciation fell 8% to $784 million, excluding one-offs. Chief executive Susan Morris said the results "do not reflect the potential of the Company" and opened a review of the business.
| Sales at stores open a year ago | −0.8% −0.8% last quarter |
|---|---|
| Profit before interest, taxes and depreciation, excluding one-offs | $784.0M −7.6% from a year ago |
| Net debt against a year of profit | 2.42 times 2.02 a year ago |
| Full-year outlook | Withdrawn new plan due by the fourth-quarter results |
⚖️ Verdict: 🔴 Bearish
The story got worse because Albertsons withdrew the full-year outlook it cut in July. The grocer called the quarter consistent with that outlook, but it no longer backs the second half. Debt climbed to 2.42 times a year of profit. One positive: profit shrank slightly less than July's plan indicated.
The question now is what the review will change. It could bring cost cuts that restore profit, or price cuts and disposals that leave a smaller business. Albertsons has promised a new financial plan by its fourth-quarter results.
🐂 Bull Case
Gross Margin Fell Less as Pharmacy Profits Improved
Gross margin is the share of sales left after the cost of the goods. At Albertsons it has dropped every quarter for more than a year. Online orders cost extra to deliver, and pharmacy sales earn less than groceries do.
This quarter the drop was smaller. The grocer said pharmacy margins improved, mainly because of Medicare's new drug prices. It still blamed "delivery and handling costs related to the continued growth in digital sales" and more shrink, meaning goods lost to theft, damage or spoilage.
- Gross margin: 26.8% of sales, against 27.0% a year ago
- Excluding fuel and an inventory accounting charge: down 0.17 percentage points
- The same measure a year ago: down 0.63 percentage points
The smaller decline matters because gross profit is where price cuts show up first. But part of the relief is mechanical: online sales are expanding more slowly, so they dilute the margin less.
What to watch: gross margin excluding fuel in the third quarter, due in January. A second small decline would show that the pressure from online orders and pharmacy is easing for good.
Profit Fell Slightly Less Than July's Plan Indicated
Albertsons measures itself on profit before interest, taxes and depreciation, excluding one-offs, known as adjusted EBITDA. In July, management told investors the second quarter would look much like the first, when that profit dropped 8.8%.
It came in at $784.0 million, down 7.6%. Chief executive Susan Morris called the result "in-line with the expectations in our revised outlook". By our math, July's comment pointed to about $774 million, so the grocer finished roughly 1% above its own marker.
That says the July plan was cautious about this quarter. It does not say shoppers returned, because sales at stores open a year ago did not improve at all.
What to watch: third-quarter adjusted EBITDA, due in January, with no company range to compare it against. A decline smaller than 7.6% would be the first sign that cost savings are reaching profit.
Positives this quarter didn't test
Six parts of the positive case got no new numbers in the press release. Each one needs a figure before it can count for or against Albertsons.
- Savings plan: $2 billion over three years; the release said savings offset cost inflation but gave no amount. A year-end figure above one-third of the total would support it.
- ACI Edge, July's reorganisation into four regions: no update on the roughly $200 million of yearly benefits. Central buying finished by mid-2027 would move it.
- Targeted price cuts: Albertsons said it made more of them, funded by savings. Positive sales at existing stores would show they work.
- Own Brands, the grocer's private-label products: a fact sheet puts the portfolio above $16 billion for fiscal 2025. A current share of sales would show progress toward the 30% goal.
- Online orders: management said in July that the business had turned profitable. A stated margin would confirm it.
- AI scheduling software for store staff: management planned a company-wide rollout for early 2027. A confirmed date would count.
🐻 Bear Case
Albertsons Withdrew an Outlook It Says It Met
Albertsons cut its fiscal 2026 forecast in July, one quarter after issuing it. Three months later the supermarket group withdrew the forecast altogether. It "is no longer providing a fiscal 2026 outlook" and plans a new one once its business review ends.
The stated reason does not match the stated result. Chief executive Susan Morris said the quarter was "in-line with the expectations in our revised outlook". A plan that is on track rarely needs withdrawing, so the doubt sits in the second half.
- Old full-year profit range: $3.550–3.625 billion, before interest, taxes and depreciation and excluding one-offs
- First 28 weeks: $1,797 million, down 8% from a year ago
- Left for the second half, by our math: about $1.79 billion, a decline of about 4.5% after removing last year's extra week
So the old plan needed the profit decline to roughly halve in the second half. Albertsons said only that "it is prudent to complete the review" first. That leaves investors with no company number for the two quarters where the improvement was due.
What to watch: the new financial plan, which Albertsons has promised by its fourth-quarter results, due around April. A fiscal 2026 profit figure below the old range would confirm that July's cut was not enough.
Store Sales Stayed Negative as Online Growth Slowed
Albertsons is cutting prices in selected markets to win shoppers back from Walmart, Amazon and Aldi, rivals its chief executive named in July. Management told investors then to expect a small improvement in sales each quarter.
The second quarter did not deliver one. Sales at stores open a year ago, which the grocer calls identical sales, slipped by the same amount as in the first quarter. The release blamed "sales deleveraging resulting from lower identical sales" for higher overhead as a share of revenue.
- Sales at stores open a year ago: down 0.8%, against growth of 2.2% a year earlier
- Online sales growth: 11%, down from 23% a year ago
- Total revenue: $18.9 billion, down 0.1%, with higher fuel sales filling part of the gap
- Stores: 2,240, which is 17 fewer than a year ago
Two things make the unchanged reading worse than it looks. Online orders were the fastest-growing part of the business, and their growth has halved in a year. The comparison also stays hard until the fourth quarter, so a recovery there will owe much to an easier base.
What to watch: third-quarter sales at stores open a year ago, due in January, against last year's 2.4% growth. Another negative number would mean the price cuts are costing margin without bringing shoppers back.
Debt Rose 15% While Albertsons Kept Buying Shares
Albertsons returns cash through a dividend and share buybacks, and it kept both going this year while profit dropped. The supermarket group paid for part of them with borrowed money.
- Buybacks and dividends, first 28 weeks: about $554 million
- Free cash flow over the same period: $311 million by our math, meaning cash from operations minus capital spending
- Total debt: $9.33 billion, up 15% from a year ago
- Interest expense: $125.0 million, up 19%
The gap matters because Albertsons reports net debt against a year of profit to its board and its banks. That ratio stood at 2.42, against 2.02 a year earlier. By our math it would be 2.46 without the extra week that last fiscal year contained.
Albertsons said interest costs rose on "higher average outstanding borrowings". Debt due within a year also climbed to $882 million, from $534 million in February. The review now covers "capital allocation priorities", so the payout policy is under examination too.
What to watch: buyback spending in the third quarter and the net debt ratio in January. Continued buybacks with a ratio above 2.42 would mean borrowing is still funding the payouts.
Risks this quarter didn't answer
Several standing risks got no new numbers in the press release. Each item below names the figure or event that would move it.
- Supplier price increases: management expected them to build in the second half and said it would not pass them on. Gross margin is still falling, and the third-quarter figure will show the cost.
- Medicare drug-price cuts: the release calls them a headwind to pharmacy sales but gives no size; the quarterly filing may.
- Lawsuits: merger litigation costs of $35.3 million and legal accruals of $19.7 million both climbed from a year ago. The opioid settlement and the Kroger case remain open.
- Finance chief: Cody Perdue holds the job on an interim basis; a permanent appointment would settle it.
- Reorganisation: ACI Edge merged 11 divisions into four regions; any store-level disruption would show up in sales at existing stores.
- Lower-income shoppers and grocery volumes: the release gives no unit figures; any disclosed volume number would move the case.
- Weight-loss drugs: the release says nothing on their effect on food volumes; a comment on the call or in the filing would.
👓 Other Themes
Albertsons Puts Its Whole Business Under Review
Chief executive Susan Morris launched a review to "tackle even harder a cost structure we can no longer afford". It covers the grocer's "customer strategy, cost structure, operating model" and its "portfolio of banners", meaning its store brands. Albertsons called ACI Edge, July's merger of 11 divisions into four regions, "the first step in a broader turnaround". An investor day follows in spring 2027.
Medicare Price Cuts Lower Pharmacy Sales Until January
A US law, the Inflation Reduction Act, cut the prices Medicare pays for some drugs from January 2026. Albertsons said pharmacy sales kept growing despite that drag, and the law helped pharmacy margins. The company earlier put the full-year hit to sales at stores open a year ago at 1.5 percentage points. From January 2027 the comparison includes the lower prices.
💲 Other KPIs
Operating profit fell 41% from a year ago, a similar drop to the first quarter. Overhead, which Albertsons reports as selling and administrative expenses, rose 0.2 percentage points of revenue even though its dollar total barely moved. Write-downs of stores and equipment added another 0.2 points. The lower gross margin explains the rest.
Buybacks cut the share count 13% from a year ago, the same pace as last quarter. That softened the per-share result: profit excluding one-offs dropped 28%, but only 18% per share. Per share, that profit was $0.36. Reported profit per share came to $0.11, against $0.30 a year ago.
Albertsons spent 5% less on stores and technology than a year ago. It completed 38 remodels, against 51 in the same period last year. Capital allocation is part of the business review. Spending so far equals about 46% of the middle of the old full-year range, by our math.
Money owed to Albertsons rose 10% from a year ago while revenue stayed almost level. Inventory grew 2%. Both tie up cash, and the release does not explain the increase in receivables.
🔮 Guidance
Withdrawn. Albertsons no longer gives a profit range for fiscal 2026 and will not issue a new one until its review ends. July's range was already a $300 million cut at the middle. By our math, it left about $1.79 billion for the second half.
Withdrawn. The July plan had these sales down 0.5% to 1.5% for the year. Each of the first two quarters came in at −0.8%, inside that range. The company gave no replacement.
Withdrawn. First-half profit per share excluding one-offs was $0.77. By our math, the old range left about $1.03 for the second half, against $1.20 a year earlier. That range assumed about $600 million of buybacks, and Albertsons has spent $388 million so far.
Withdrawn with the rest of the fiscal 2026 outlook. The range stood at $1.9–2.0 billion after a cut in July. Capital allocation is one subject of the review, so the spending plan could change again.
Withdrawn. The quarter's rate was 17.9%, which lifted reported profit. For the first 28 weeks the rate was 22.8% by our math, also below the old range.
Unchanged. Albertsons will pay $0.17 per share on November 6. The board lifted the payout 13% in April, before the July cut to the outlook. Dividends cost about $83 million in the second quarter, by our math.
❓ Key Questions
Why withdraw an outlook the quarter was in line with?
Albertsons said results matched its revised plan, then pulled the plan. Investors need to know what changed for the second half: supplier costs, deeper price cuts, or the cost of the review itself.
Will buybacks continue while the review runs?
Payouts exceeded free cash flow in the first 28 weeks and debt climbed. The review covers capital allocation, but the release does not say whether repurchases pause until it ends.
Which store brands and markets might Albertsons sell or close?
The review includes the portfolio of banners and markets, and the quarter carried $42.4 million of losses largely from store write-downs. The number of unprofitable stores remains undisclosed.
How much of the lower profit is deliberate price investment?
Management has declined to size its spending on lower prices. Without that figure, nobody outside can separate weaker demand from a chosen investment that might pay back.
How many loyalty members does Albertsons have now?
The company published a member count every quarter through February, when it stood at 51.2 million. The release and fact sheet give none, so the health of the programme is unknown.