Albertsons Companies (NYSE:ACI) reported weaker-than-expected first-quarter fiscal 2026 results and lowered its full-year outlook, citing continued grocery unit pressure, softness among lower-income shoppers and planned investments to improve its customer value proposition.
On the company’s earnings call, CEO Susan Morris said identical sales declined 0.8% in the quarter, while adjusted EBITDA totaled $1.013 billion and adjusted earnings per share were $0.42. Morris said pharmacy and digital remained areas of strength but were not enough to offset broader pressure in the core grocery business.
Albertsons Launches ACI Edge Operating Model
A central theme of the call was the rollout of “ACI Edge,” a new operating model designed to simplify Albertsons’ structure and improve execution. Morris said the company is moving from 11 divisions to four regions: California, West, South and East. Albertsons is also centralizing Center Store merchandising.
Morris said the changes are intended to help the company “move faster, make better decisions, scale successful ideas more consistently, and deploy resources” toward banners and capabilities with the greatest opportunity. The new model is intended to combine national scale in areas such as merchandising, sourcing, supply chain, technology and talent with regional accountability in fresh, service, store standards, local merchandising and community connection.
Each region will be led by an Albertsons executive with end-to-end responsibility for performance, while one enterprise merchandising organization will manage category strategy and supplier partnerships. Morris said leadership appointments are complete, Center Store centralization has begun and work streams across merchandising, sourcing, supply chain and overhead are underway.
Albertsons expects ACI Edge to generate approximately $200 million of incremental annual run-rate benefits, with savings building through fiscal 2026 and the majority realized in fiscal 2027. The company expects about $50 million of transition costs across fiscal 2026 and 2027. Morris said the savings are intended to fund reinvestment in value, fresh execution, personalization, digital convenience and unit growth.
Updated Outlook Reflects Softer Demand and Value Investments
President and CFO Sharon McCollam said first-quarter performance fell short of expectations and that the company moved quickly to address the issues. Identical sales decreased 0.8%, reflecting ongoing industry unit declines and macroeconomic pressures. McCollam said the decline was most pronounced among lower-income customer segments, where Albertsons saw softness in both units and baskets.
Reported identical sales were also pressured by approximately 100 basis points from the Inflation Reduction Act’s impact on pharmacy and 50 basis points from egg deflation. Excluding those headwinds, McCollam said identical sales increased approximately 0.7%, driven by pharmacy scripts and digital growth.
Albertsons updated its fiscal 2026 outlook to reflect a more cautious view of the consumer environment and increased investment in customer value. The company now expects:
- Identical sales of negative 0.5% to negative 1.5%, or 0% to 1% excluding an expected 150-basis-point full-year headwind from the pharmacy Inflation Reduction Act impact.
- Adjusted EBITDA of $3.55 billion to $3.625 billion.
- Adjusted EPS of $1.75 to $1.85, including approximately $600 million of share repurchases during fiscal 2026.
- An effective tax rate of 24% to 25%.
- Capital expenditures of $1.9 billion to $2 billion.
McCollam said Albertsons expects only gradual improvement in industry units and modest improvement from its own actions through the balance of the year. She said improvement is expected to come primarily from the grocery side of the business, while pharmacy will face tougher comparisons from prior-year script buys.
Digital, Loyalty and Pharmacy Remain Growth Areas
Morris said digital sales grew 13% during the quarter, with penetration increasing to nearly 10.5%. She said the company’s loyalty ecosystem continues to scale personalization, with engaged members shopping more frequently and with higher average baskets than non-members.
Flash delivery remained the fastest-growing part of Albertsons’ digital offering. Morris also said e-commerce, including first-party and third-party businesses, was profitable in the first quarter. In response to an analyst question, McCollam said e-commerce still creates negative gross margin mix pressure because its gross margin rate is lower than traditional grocery, even though the business has “tipped over into profitability.”
Pharmacy also remained a key growth platform. Morris said reported pharmacy sales continued to be pressured by the Inflation Reduction Act and brand-to-generic mix, but Albertsons continued to see outsized script, immunization and clinical service growth. She said the pharmacy business is profitable on a standalone basis and continues to improve.
Albertsons’ retail media business also grew in the quarter, with on-site revenue up significantly year over year. Morris cited increased monetization of new and existing display placements, the launch of a branded entertainment offering called Shopper Informed Content and the integration of sponsored product discovery into AI-powered conversational search.
Company Emphasizes AI, Productivity and Targeted Pricing
Morris said technology and AI are foundational to ACI Edge. Albertsons is focusing enterprise AI efforts on digital customer experience, merchandising intelligence, labor optimization and supply chain optimization. Initiatives include conversational search and planning tools, AI-assisted category planning and promotion tools, an AI-powered workforce management platform expected to roll out enterprise-wide in early 2027, and machine learning tools for forecasting, inventory and replenishment.
Albertsons also reiterated its broader productivity target. Morris said the company remains on track to realize more than one-third of its three-year, $2 billion productivity target in fiscal 2026, and said the simplified operating model is uncovering additional opportunities.
During the Q&A session, Morris said pricing investments are “very surgically and selectively” targeted and are not broad-based discounting. She said investments are being made in specific markets and categories where customers are making purchase decisions, including around price perception, fresh, personalization and convenience. Morris said Albertsons is not making a major change to its high-low promotional pricing strategy or moving to an everyday-low-price model.
Morris said lower-income customers are shifting to private label, value packaging and cheaper proteins, while higher-end customers appear more resilient. She also said the company’s largest leakage among lower-income shoppers is to major competitors including Walmart, Amazon and, to some degree, Aldi.
CFO Sharon McCollam to Retire
The call also addressed McCollam’s planned retirement. Morris credited McCollam, who joined Albertsons in 2021, with helping shape the company’s financial, operational and strategic priorities. Morris said Albertsons is conducting a comprehensive search process that includes both internal and external candidates.
McCollam said it had been “a privilege to serve Albertsons” and that she would retire with confidence in the company’s future. She thanked Morris, the board, shareholders and Albertsons associates for their support.
Morris closed the call by saying Albertsons’ priorities are clear and that the company is focused on improving the trajectory of the business through ACI Edge, targeted customer investments and continued focus on digital, loyalty, media, AI and data-driven personalization.
About Albertsons Companies (NYSE:ACI)
Albertsons Companies, Inc (NYSE: ACI) is one of the largest food and drug retailers in the United States, operating a diversified portfolio of grocery store banners. Founded in 1939 by Joe Albertson in Boise, Idaho, the company has grown through both organic expansion and strategic acquisitions. Its core business activities encompass the sale of fresh produce, meat, bakery items, deli offerings, pharmacy services, and general merchandise. The company’s retail operations are complemented by an in-house private-label program, featuring brands such as O Organics, Open Nature, and Lucerne, which cater to a range of customer preferences and price points.
Throughout its history, Albertsons Companies has pursued growth via mergers and partnerships.
