By Nicholas G. Miller
Albertsons narrowed its full-year expectations as the grocer said Medicare price cuts would hurt financial results.
The company also said on an earnings call Wednesday that the consumer backdrop was "mixed" with pressure across all income levels and noted a "more aggressive promotional environment," especially during the holidays.
Albertsons' shares fell to a 52-week low of $15.80 in morning trading recovering slightly to $16.11, leaving them down 5.8% at midday.
While the Inflation Reduction Act on Medicare's drug price negotiation program will result in lower reported pharmacy sales, the impact to profit is "near neutral," the company said.
Albertsons estimated that the effects from the program will hurt fourth-quarter identical sales by 65 to 70 basis points.
As for consumer spending, "at the low end, shoppers are clearly stretched, putting fewer items in the basket each trip and prioritizing essentials while visiting more frequently as they manage their cash flow," said Chief Executive Susan Morris.
"Middle-income households, which have been relatively resilient, are showing some signs of softening, with increased price sensitivity and trade-down behavior emerging in certain categories," he added.
Upper-income consumers have largely continued to spend but are also becoming more conscious of price and value, Morris said.
"In the divisions where we've launched our new lower price campaign, we continue to see fundamentally better unit trends and growth in unit share," Morris said.
Albertsons will continue to invest in lower prices, while also relying on personalized promotions, loyalty enhancements and the tight management of cost inflation to attract budget-conscious customers, Morris said.
The company's third-quarter sales increase was boosted by growth in its digital channel and pharmacy business. The pharmacy growth was driven by immunizations, weight-loss drugs and core prescriptions, while delivery speed and new AI tools helped digital sales. Identical sales in the quarter rose 2.4%.
The company narrowed its fiscal year adjusted earnings guidance to $2.08 to $2.16 a share, compared with its previous forecast of $2.06 to $2.19 a share. It also updated its identical sales growth guidance to 2.2% to 2.5%, compared with its previous range of 2.2% to 2.75%.
Analysts see full fiscal-year adjusted earnings of $2.14 a share and identical sales growth of 2.4%.
For the third quarter, the grocery chain posted net income of $293.3 million, or 55 cents a share, down from $400.6 million, or 69 cents a share, the year prior.
Adjusted earnings were 72 cents a share. Analysts polled by FactSet had expected 68 cents.
Net sales and other revenue rose 1.9% to $19.12 billion, boosted by a 21% increase in digital sales. Wall Street had expected $19.16 billion.
Write to Nicholas G. Miller at nicholas.miller@wsj.com
(END) Dow Jones Newswires
January 07, 2026 12:33 ET (17:33 GMT)
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