Albertsons tops earnings forecast, maintains dividend as Kroger deal looms

Albertsons (ACI) – Get Free Report posted stronger-than-expected fiscal-third-quarter earnings Tuesday while maintaining its dividend, but the grocer cautioned that consumer spending on food staples could slow into the coming year.

Adjusted earnings for the three months ended Dec. 2 came in at 79 cents a share, down 9.2% from the year-earlier period but firmly ahead of the Wall Street consensus forecast of 66 cents a share.

Group revenue rose 2.5% to $18.56 billion, again topping analysts’ estimates of a $15.37 billion tally. Same-store sales rose 12.3%, the retailer said, while digital sales more than tripled (up 225%).

The group also declared a cash dividend of 12 cents a share, payable Feb. 9 to holders of record Jan. 26. That’s the same level since it received court permission for a $4 billion dividend linked to its proposed $25 billion tieup with Kroger  (KR) – Get Free Report.

“We delivered another solid quarter amidst a challenging economic backdrop,” said Chief Executive Vivek Sankaran. “As we look ahead, our ambition is to create Customers for Life, in part through our focus on operational excellence in our stores, driving growth in our digital and pharmacy operations, and deepening our relationships with our customers.

“While we are benefiting from our productivity initiatives, we expect to continue to see the impacts of investments in associate wages and benefits, cycling significant prior-year food inflation, customers receiving less government assistance, the resumption of student loan payments and other types of payment deferrals … as we continue to lean into increased customer engagement in our Customers for Life strategy,” he added.

Albertsons shares were marked 1.04% lower in premarket trading immediately following the earnings release to indicate an opening bell price of $22 each. 

The Federal Trade Commission is reviewing the $25 billion Kroger deal, which would combine the nation’s two biggest grocery store chains and create a stand-alone giant with nearly 5,000 stores and annual revenue of more than $220 billion.

In an effort to offset regulatory and consumer-advocacy concern, Kroger has pledged to invest another $1.3 billion toward upgrading Albertsons stores – which include brands such as Acme, Safeway and Vons – as well as another $1 billion to improve benefits and wages for the group’s employees.

The two companies, which had earlier hoped to close the deal this month, are now looking for a completion date later this spring as the FTC concludes its months-long review.

“We continue to work cooperatively with the FTC in its review of the transaction,” Kroger CEO Rodney McMullen told investors on a conference call in late November. “This step keeps us on track to close our proposed merger with Albertsons in early 2024.”

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