Albertsons Slumps 5%—What's Driving the Slide?

• ACI plunged 5.17% to $20.99, hitting a session low of $20.57
• Q1 earnings showed $0.55 adjusted EPS vs. $0.66 prior year, despite 2.8% identical sales growth
• Sector underperformer: Food & Staples Retail down 3.2% YTD

Albertsons' shares cratered post-earnings as investors digested margin pressures, even as digital sales surged 25%. The stock now trades near its 200-day moving average, with the broader grocery sector struggling against macroeconomic headwinds.

Margin Squeeze Overshadows Sales Growth
The stock's collapse stems directly from Q1 results revealing a 85bps gross margin contraction to 27.1%, driven by pharmacy sales dilution and rising digital fulfillment costs. While identical sales grew 2.8% and adjusted EBITDA hit $1.11B, the 14% drop in adjusted EPS year-over-year spooked investors. Management's warnings about tariff-related cost pressures - despite current avoidance - amplified concerns over profitability sustainability.

Grocery Sector Stumbles, Kroger Holds Steadier
The Food & Staples Retail sector has declined 3.2% YTD, with Albertsons' 5% drop amplifying the weakness. Notably, sector leader Kroger (KR) outperformed with -0.6% intraday movement, though its own margin challenges persist. The divergence highlights investor preference for companies demonstrating better cost discipline despite shared macroeconomic pressures.

Bullish Options Signal Buying Opportunity
Technical Indicators:
• Bollinger Bands: Current price ($20.99) near 200-day MA ($20.46)
• RSI: 50.0 (neutral)
• MACD: 0.163 (bullish crossover potential)

With the stock testing its 200-day MA, aggressive buyers could look to establish positions near $20.50 support. Two standout options:

1. ACI20250725P20 (Put, $20 strike, July 25):
- Delta: -0.21 | Theta: -0.0052 | Gamma: 0.222
- Leverage ratio: 131%
- Offers 5% downside protection with strong gamma sensitivity for price swings

2. ACI20250725P20.5 (Put, $20.5 strike, July 25):
- Delta: -0.327 | Theta: -0.0054 | Gamma: 0.318
- Leverage ratio: 84%
- Ideal for targeting $20.5 support with high gamma amplification

In a 5% downside scenario to $19.94:
- P20 would gain $0.56 intrinsic value
- P20.5 would gain $0.55 intrinsic value
Bulls should watch $21.70 resistance while bears target $20.00 breakdown.

Action Alert: Aggressive traders may layer in P20 puts if $20.50 holds, while long-term holders should wait for confirmation below $20.00 before scaling out.

Backtest Albertsons Stock Performance
The backtest of ACI's performance after a -5% intraday plunge shows mixed results. While the 3-day win rate is 50.62%, the 10-day win rate is slightly higher at 50.80%, and the 30-day win rate is 49.73%, indicating a moderate likelihood of positive returns in the short term. However, the maximum return during the backtest period was only 0.19%, which suggests that while there is a chance of recovery, the potential upside is limited.

Hold the Fort Near Support, Watch Margin Trends
Investors face a critical juncture: $20.46 200-day MA holds, the slide stalls. Below this level, $19.50 becomes the next battleground. While Kroger's resilience (-0.6%) hints sector underperformance isn't uniform, Albertsons' margin struggles demand clarity. Key catalysts ahead: August's digital sales update and tariff resolution timeline. For now, traders should prioritize downside risk management while monitoring $20.50 resistance recovery attempts. Final Take: Wait for $20.00 breakdown confirmation before going all-in on the bear case.