Albertsons Companies, the second-largest pure-play grocery chain in the U.S., has outlined its cost-cutting plans following the collapse of its proposed merger with Kroger. The merger, which would have created the largest grocery chain in the country, was blocked by federal judges last month due to concerns about reduced competition and higher prices for consumers. Albertsons, which reported strong earnings in its third-quarter financial report, is now focusing on growth initiatives and cost-cutting measures to improve its competitive position.



Albertsons' earnings of $0.68 per share on revenue of $18.77 billion beat consensus estimates, offsetting a small revenue miss. The company reported net income of $400.6 million, or 69 cents a share, for the quarter ended Nov. 30, up from $361.4 million, or 62 cents a share, in the year-earlier period. Adjusted for one-time items, per-share earnings came to 71 cents, ahead of the 66-cent FactSet consensus. Sales rose 1.2% to $18.775 million, just below the $18.819 billion FactSet consensus. Same-store sales rose 2%, matching the FactSet consensus.

Albertsons CEO Vivek Sankaran said the company benefited from investments in a program aimed at improving customer loyalty, which helped drive digital engagement. Same-store sales growth was driven by strong growth in pharmacy sales. "As we look ahead to the balance of fiscal 2024 and beyond, we are energized about our plans to accelerate growth through our Customers for Life strategy, leveraging investments to enhance digital engagement and omnichannel revenue growth, improve our value proposition with customers, and drive digital-media growth," he said.

Albertsons plans to cut spending by $1.5 billion over the next three years by leveraging investments in technology. The company aims to deliver $1.5 billion in savings over the next three years to invest in "value proposition and growth initiatives, as well as to offset inflationary headwinds." However, further details were minimal.

The company also updated its financial outlook for fiscal 2024, increasing its adjusted EBITDA to a range of $3.95 billion to $3.99 billion, up from the previous outlook of $3.9 billion to $3.98 billion. Albertsons expects fiscal 2024 same-store sales to rise by 1.8% to 2.0%, compared with prior guidance for a range of 1.8% to 2.2%. The company expects adjusted earnings per share of $2.25 to $2.32, compared with prior guidance of $2.20 to $2.30.

Albertsons' cost-cutting measures, which aim to reduce spending by $1.5 billion over the next three years, will help the company improve its competitive position against larger rivals like Walmart and Costco. By leveraging investments in technology and streamlining operations, Albertsons can enhance its efficiency and lower prices for consumers. This will enable the company to better compete with its larger rivals, who have significant buying power and scale. Additionally, Albertsons' focus on digital engagement, loyalty programs, and pharmacy services will help differentiate the company and attract more customers.

Albertsons' cost-cutting plans, supported by specific examples and data from the materials, demonstrate the company's commitment to lowering prices and attracting price-sensitive consumers in a competitive market. By balancing cost-cutting with investments in technology and digital platforms, Albertsons seeks to drive long-term growth and improve its value proposition with customers.