By Ananya Mariam Rajesh
(Reuters) -Supermarket chain Albertsons raised its annual profit forecast on Wednesday, benefiting from investments in its pharmacy operations and loyalty program, even as grocery demand took a hit due to intense competition from bigger retailers.
Shares of the company rose nearly 1% in early trading after it beat third-quarter profit estimates.
Albertsons, which has sued Kroger after the grocer terminated their $25 billion deal, has outlined plans to grow its business, which it has already expanded through its new digital health and wellness platform, Sincerely Health. It has also enhanced its digital sales and loyalty program by adding newer vendors to pull in shoppers.
CEO Vivek Sankaran said in the company’s first post-earnings call in more than two years that it is looking to deliver $1.5 billion in savings over the next three years and build out its retail media business to run targeted media campaigns and increase customer spend.
“A lot of the big box retailers have media businesses and they’re leveraging the data that they have, using generative AI to harness and understand it better and then to target the marketing to consumers better,” Telsey Advisory Group analyst Joseph Feldman said.
Albertsons now expects a fiscal year 2024 adjusted profit of $2.25 to $2.31 per share, compared to the previously forecast $2.20 to $2.30.
However, it lowered the upper end of its annual sales forecast as it faces stiff competition from bigger rivals including Walmart and Kroger – which intensified during the holiday season – to attract customers seeking to buy essentials at the lowest prices.
A mass retailer and a club retailer are growing much faster, and Albertsons must compete with them and perform better to gain market share overall, Sankaran said.
Albertsons now expects annual identical sales growth in the range of 1.8% to 2.0%, compared to a prior forecast of 1.8% to 2.2%.
Its third-quarter net sales rose 1.2% to $18.78 billion, missing analysts’ estimate of $18.82 billion, according to data compiled by LSEG. It reported adjusted profit of 71 cents per share, but beat an expectation of 66 cents.
(Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Pooja Desai)
