Albertsons tries to figure out what’s next after failed Kroger bid

The news: Less than a month after Albertsons terminated its merger agreement with Kroger, the grocer raised its annual profit forecast and began mapping out a multipronged approach to drive long-term growth.

• The grocer expects its fiscal year 2024 adjusted profit to range between $2.25 and $2.31 a share, up from its previous forecast of $2.20 to $2.30.
• But it lowered the upper end of its annual identical sales growth forecast from 2.2% to 2%, citing the challenging environment where price remains a top concern for many consumers.
• To compete against larger rivals like Walmart and Costco, the retailer plans to slash prices on some products, CEO Vivek Sankaran said.

The strategy: As it attempted to merge with Kroger, Albertsons was also investing more money in capital expenditures than ever before, CFO Sharon McCollam said on the company’s first earnings call since July 2022. Those strategic investments make Albertsons “a stronger company today than pre-merger,” she added.

These investments focused on three key areas:

1. Retail Media: Albertsons has been enhancing the capabilities of its Albertsons Media Collective. This includes improving shopper audience targeting, running more focused media campaigns, and achieving better campaign measurement. The company earlier this week launched a new API that lets advertisers integrate campaign performance data into their own measurement models.
2. Digital: Albertsons’ digital sales grew 23%, reaching over 7% of its grocery revenues. The retailer attributed these gains to new mobile app capabilities and improvements in its DriveUp & Go and in-home delivery services. Albertsons still sees significant room for expansion, as its digital penetration remains under industry benchmarks.
3. Loyalty: After revamping its loyalty program in April to make it easier to earn points and redeem rewards, Albertsons increased customer engagement, retention, and spending. Those gains are important because the program serves as a critical entry point for personalized marketing and retail media.

Our take: While Albertsons is wise to lean into price and convenience, it still has a ways to go to win share from competitors like Walmart and Kroger.

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