Albertsons Companies (NYSE:ACI) released fourth-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.
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Summary
Albertsons Companies reported a 0.7% increase in identical sales for Q4, with an adjusted EBITDA of $903 million, despite pharmacy headwinds.
The company returned $1.8 billion to shareholders in 2025 and plans to increase its quarterly dividend by 13% and refresh its share repurchase authorization to $2 billion.
Strategic focus includes store modernization, customer-centric experiences, and leveraging AI and technology to enhance efficiency and personalization.
For fiscal 2026, the company expects identical sales growth of 0-1%, with an adjusted EBITDA range of $3.85 to $3.925 billion, and significant investments in capital expenditures.
Management highlighted strong progress in digital penetration, loyalty ecosystem growth, and improvements in pharmacy profitability despite regulatory headwinds.
Full Transcript
OPERATOR
Welcome to the Albertsons Companies’ fourth quarter and full year 2025 earnings conference call and thank you for standing by. All participants will be in listen only mode until the Q and A session. This call is being recorded. I would like to hand the call over to Cody Perdue, Senior Vice President, Treasury Investor Relations and Risk Management. Please go ahead. Good morning and thank you for joining us. With me today are Susan Morris, our CEO, and Sharon McCollum, our President and CFO. Today, Susan will provide an overview of our fourth quarter and full year 2025 results and update you on our strategic progress, highlighting areas of particular focus as we enter fiscal 2026. Then Sharon will provide the details related to our fourth quarter and full year financial results and our outlook for 2026 before handing it back to Susan for closing remarks. After management comments, we will conduct Q and A session. I would like to remind you that Management may make forward looking statements within the meaning of the federal SECurities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in our filings with the SEC. Any forward looking statements we make today are only as of today’s date and we undertake no obligation to update or revise any such statements as a result of new information, future events or otherwise. Additionally, we will be discussing certain non-GAAP financial measures. A reconciliation of these financial measures to the most directly comparable GAAP financial measures can be found in this morning’s earnings release and with that I will hand the call over to Susan.
Susan Morris (CEO)
Thanks Cody Good morning everyone and thanks for joining us today. In the fourth quarter, our teams led with operational agility and strong execution despite greater than expected pharmacy challenges. Identical sales increased 0.7% while our resilient operating model and ongoing productivity drove better than expected adjusted EBITDA of 903 million for the full year. We delivered results in line with our expectations while investing in capabilities that strengthened our business further positioning us for long term growth. Also, during fiscal 25 we returned more than $1.8 billion to shareholders through share repurchase and dividends, underscoring our commitment to shareholder returns and disciplined capital allocation. Throughout 2025, our teams leaned into a new day, executing with focus amidst a volatile and uncertain macro environment. The results we delivered validate the effectiveness of our investments, the progress we’re making across the business, and the strength of the foundation that we have built. As we enter 2026, we do so with confidence as reflected in today’s outlook. This confidence is further reinforced by our announcement this morning to increase our quarterly dividend by 13% and refresh our existing share repurchase authorization to $2 billion. But before we talk more about the fourth quarter and 2026, I want to step back and talk about how we see the future of Albertsons and how we’re positioning the company to win in a competitive, value focused grocery environment that requires differentiation. At the core of our strategy is a clear conviction the future of grocery is personal and true personalization is a durable competitive advantage. Our mission is to become the most loved grocer in the neighborhoods we serve by transforming routine transactions into differentiated customer connections and experiences that deepen engagement. It’s not a reinvention of who we are, it’s a deliberate build on strengths that already differentiate us from and give us the right to win. We have one of the strongest store networks in the country. In our markets, our stores are within 15 minutes of approximately 120 million people, giving us a structural advantage in trip frequency, pharmacy access and fast same day fulfillment. Put simply, our store network cannot be replicated and is further strengthened by our team, our data, artificial intelligence and next generation technology capabilities which allow us to personalize a customer’s entire experience. We also have the scale and capabilities to deliver sustainable value. In our stores, we provide market tailored fresh offerings and value enhancing services. In E commerce, we offer speed, convenience and variety from our store based fulfillment model. In pharmacy we don’t just fill prescriptions, we immunize and treat our patients along their wellness journey. And we have strong loyalty engagement where deep relationships with our banners and private brands provide us the data and insights to personalized experiences at scale. These foundational strengths working together bring our strategy to life under three tightly connected pillars. A winning footprint, a customer centric experience and balanced value. Our winning footprint is not only a critical differentiator, but a deep and structural competitive advantage that enables both convenience and local relevance. We’re taking a disciplined market by market approach to banner optimization, store modernization, market densification where we have the right to win and store rationalization where the economics are structurally challenged. This is not about growth for growth’s sake. It’s about optimizing return on investment, elevating the customer centric experience and ensuring that every store plays a clear role in winning in its local market. To elevate the customer experience, we’re creating scalable yet personal experiences. Experiences that are differentiated combine caring, service, quality and fresh, convenience, value and own brands, all while remaining simple and easy for our customers to navigate. To deliver this, we’re building on capabilities and offerings where our brands already have credibility and our customers trust. Fresh is a great example. Our customers know they can trust us with their custom birthday cake order, to have perfectly trimmed steaks for their barbecue or to be there for them with our fresh cut options. We’re leaning into our strength as a scaled fresh destination, combining service solutions, innovation and expertise to drive both loyalty and share. We’re also expanding into what we call food now, broadening our role in customers daily lives by providing meal solutions that allow us to compete for a larger share of food occasions, not just the weekly stock up. Today our deli and prepared foods drive more than a third of total trips and we have outsized share of wallet that continues to grow in this area. At the heart of our mission we are deepening the personal, digital and loyalty relationship, connecting online and in store experiences so customers feel recognized, seen and valued wherever they engage with us. The outcome we’re driving here is simple. Customers don’t just shop with us, they choose us. We’re very clear eyed about today’s consumer. They remain focused on value, making a balanced value proposition more critical than ever. Our approach to this is deliberate and sustainable. Scale is a real advantage that we will leverage every day, including capitalizing on buying better together at the national level, expanding our own brand penetration and growing our retail media platform. All to provide fuel to reinvest in value. At the same time we’re accelerating automation and artificial intelligence enabled tools across merchandising stores and supply chain to improve efficiency. To add further fuel for investment. We are surgically investing where it matters most to our customer. That includes getting sharper on key value items and driving own brand penetration, both funded through structural margin improvement and productivity, not short term trade offs. But it also includes the convenience, speed and value we can offer with our assortment. The result is building a balanced value equation that works for customers and in turn for all stakeholders while protecting long term returns and making us our customers retailer of choice. Underpinning all of this is our team powered, data driven and artificial intelligence enabled company using technology not to replace the human element but to amplify it as we look ahead. Our focus is on building a company that can grow sustainably through all cycles. We have a clear path to accelerating revenue growth, strengthening margins and improving returns while staying true to what makes Albertsons distinctive. Becoming the most loved grocer in our neighborhoods is how we bring this to life while building on the initiatives and capabilities we’ve been focused on making grocery personal at scale, earning customers for life and delivering long term value for shareholders. I’ll now turn back to the quarter to highlight the progress we are making across our priorities that continue to strengthen our foundation and position us for sustainable, profitable growth in fiscal 2026. Technology and artificial intelligence sit at the center of our transformation. Our four big bets Digital Customer experience, merchandising, intelligence, labor optimization and supply chain optimization are not pilot programs. They’re all long term structural initiatives designed to drive growth and expand margin. This quarter we continue to see tangible progress in digital customer experience. artificial intelligence driven capabilities are modernizing the way customers shop, delivering personalization that drives higher conversion, larger baskets and greater loyalty. Merchandising intelligence, automated insights and intelligent pricing tools are improving category decision making and supporting structurally stronger margins. We are in flight with tools that are reimagining price and promotional strategy as well as category management and assortment decisions. Labor Optimization Our generative artificial intelligence scheduling tools will improve forecast accuracy, reducing complexity for associates and driving labor efficiency in supply chain. Our artificial intelligence powered demand forecasting and computer vision are improving availability, quality and freshness while lowering inventory and fulfillment costs. As part of our investments in supply chain, we’ve launched Gateway, a proprietary artificial intelligence powered tool that boosts inventory efficiency and replenishment for promotional center store SKUs. All of these initiatives are building the modern technology enabled albertsons that will define our competitiveness in fiscal 2026 and beyond. Our digital and e commerce business continues to be a strong growth engine building on the momentum that we delivered throughout fiscal 25. Digital penetration surpassed 10% in Q4, a new milestone for our omnichannel ecosystem. Our first party business continues to scale rapidly and contributed nearly 90% of our 16% digital growth this quarter as we continue to elevate our customer experience. Our artificial intelligence enabled shopping assistant, already showing meaningful lift in basket size, continues to enhance personalization and we see significant Runway ahead as customer adoption increases. The strength of our store based fulfillment model also continues to differentiate. Our proximity advantage enables speed and efficiency at scale as we continue to fulfill more than half of digital orders in under three hours. Additionally, the vast majority of delivery households are eligible for 30 minute flash delivery which is our fastest growing digital segment. We maintain strong conviction in digital as a driver of sustainable growth and margin expansion as we scale retail media, enhance marketing efficiency and strengthen loyalty engagement. Our third party business also remains a convenient choice for some customers and is a gateway for for introducing new customers to our first party offering. Our loyalty ecosystem continues to be one of our strongest competitive advantages, creating deeper stickiness and fueling our Strategy, membership grew 12% to more than 51 million members. With more frequent transactions, easier reward redemption and higher spending among engaged households. The program’s momentum reflects both simplicity and relevancy. Customers are gravitating toward immediate value, including increasing redemption through the cash off option, which is clear evidence that we’re meeting their needs in a value focused environment. Loyalty is also a flywheel for growth. It enriches our data, strengthens our media collective and helps us personalize promotions with increasing precision. Across the board, loyalty is driving higher lifetime value, deeper omnichannel engagement and a more predictable resilient revenue base, all essential components of our long term growth algorithm. Our media business gained further momentum in Q4 driven by deeper integration across our platform. By embedding media into the customer journey and merchant partnerships, we’re delivering targeted measurable value at scale in the quarter. Our personalized ad pilots delivered a 90% lift in conversion and click through rates, validating a clear path to scale personalization driving higher relevance and improved return on ad spend. This approach is translating into a structurally attractive profit stream that amplifies and fuels our core retail business. Our customer value proposition continues to strengthen, making shopping more affordable, intuitive and personalized across our market. By combining our rich store customer and category level data with disciplined price investments, we are delivering clear, more consistent value through targeted pricing actions, improved loyalty driven promotions and continued own brands innovation. We’re reinforcing trust with customers who increasingly expect transparency and consistency in their weekly shop. Our approach remains deliberate protect affordability, sharpen value perception and use data driven personalization to meet customers where they are across income levels, trip types and missions. The result? A value engine that supports growth and protects margin through all cycles. In pharmacy, we delivered improved profitability despite top line pressure from the government mandated Inflation Reduction act that took effect mid quarter. This performance reinforces our confidence in our strategy to improve pharmacy standalone profitability while also driving materially higher customer lifetime value among customers who shop both pharmacy and grocery. Looking ahead to 2026, we remain focused on increasing operational productivity through expanded central fill, enhanced procurement and the scaling of higher margin services while maintaining disciplined management of reimbursement and regulatory headwinds. Finally, productivity remains a foundational pillar of our strategy and a meaningful source of both fuel and flexibility. Across fiscal 25, our teams executed with discipline, unlocking efficiencies across labor, store operations, supply chain merchandising and global capability centers. This included a deliberate focus on reducing shrinking spend and improving units per labor hour, driving better in store execution and structurally lower cost Importantly, this work does not reset in 2026. It builds. As we enter fiscal 26, we are scaling the same productivity engine further through a $2 billion three year productivity program supported by our technology agenda and our four big bets in artificial intelligence. Our progress continues to strengthen our operating model and reinforce our ability to grow through all cycles. Our teams delivered a strong close to fiscal 25 and we are entering fiscal 26 from a position of confidence, clarity and momentum. With that, I’ll turn it over to Sharon to walk through our financial results and 2026 outlook.
Sharon McCollum (President and CFO)
Thank you Susan and good morning everyone. It’s great to be here with you today. Before turning to results, I want to briefly update you on this morning’s announcement of our proposed nationwide opioid legal settlement framework. This framework provides for a $774 million settlement payable over nine years that was recorded during the fourth quarter. This proposed settlement is a meaningful step toward resolving our opioid related litigation without any admission of wrongdoing or liability. We remain committed to patient safety, strong pharmacy practices and being a constructive partner in addressing the opioid crisis as communities needs evolve. Now let me turn back to our fourth quarter results. In Q4 we delivered better than expected adjusted EBITDA and adjusted EPS despite industry wide pharmacy dynamics that pressured reported identical sales. Identical sales in Q4 increased 0.7% net of approximately 145 basis points of pharmacy related headwinds versus the expectation we provided in our Q3 outlook of approximately 65 to 70 basis points. These headwinds were primarily driven by a greater impact from the Inflation Reduction Act, which I will call IRA (Inflation Reduction Act) and broader industry affordability dynamics. Specifically, IRA (Inflation Reduction Act) pricing and mix pressure accelerated more quickly than expected while the industry shifted toward a higher generic to brand mix. Together, these Factors represented an approximate 105 basis point headwind to ID sales in the quarter. Importantly, while the top line impact was meaningful, the margin impact was favorable as generics are structurally more accretive. In addition, we saw a Greater moderation in GLP1 growth driven by tighter payer criteria and increased direct to consumer penetration. This represented an incremental 40 basis point headwind to identical sales compared to our Q3 outlook. So in total, Pharmacy created an approximate 145 basis point headwind to our Q4ID sales expectations with better than expected adjusted EBITDA flow through in grocery units and ID …
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