Shares of the grocery store chain Albertsons fell by 8% on Tuesday as of 1:00 p.m. ET. The decline followed the company’s earnings report, which indicated that while the recent quarterly results were strong, the projected future profits were considerably lower than what analysts had anticipated.
Despite the recent downturn, Albertsons’ stock had shown an increase for the year, even as the broader market faced declines due to concerns about tariffs and economic instability. This surge might have set the stage for a market correction. Additionally, the impending retirement of Albertsons’ CEO might have influenced the company’s cautious earnings forecast.
In the fourth quarter, Albertsons experienced a 2.5% rise in revenue, reaching $18.8 billion, driven by a 2.3% increase in same-store sales, aligning with expectations. The adjusted earnings per share (EPS) decreased by 15% to $0.46, though this exceeded analyst projections of $0.41.
While the fourth-quarter EPS surpassed expectations, the company’s full-year 2025 EPS projection of $2.03 to $2.16 per share was disappointing, as it fell below the anticipated $2.28. This guidance suggests a continuing trend, marking the third consecutive year of adjusted earnings declines for Albertsons.
The company’s pharmacy operations significantly contributed to revenue growth, and investments in delivery and digital programs led to a 24% growth last quarter. However, these pharmacy revenues are lower-margin, and the delivery expansion required further investments, thus affecting Albertsons’ gross margins. The company also maintained stable pricing to remain competitive.
Albertsons’ CEO, Vivek Sankaran, plans to retire on May 1, with COO Susan Morris set to succeed him. Companies often provide conservative forecasts before a management change to allow the new leader to surpass expectations early in their tenure. Although it is unclear if this is the case with Albertsons, conservative guidance remains a possibility given the current earnings trend.
Overall, Albertsons could be considered a defensive stock during a potential recession, as consumers are likely to continue purchasing groceries over dining out. However, the company faces significant competition, especially since its proposed merger with Kroger was rejected last year. Therefore, investors seeking substantial earnings growth or significant surprises might want to explore other opportunities.