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Albertsons (ACI) Q4 Earnings Beat, Identical Sales Rise 7.5%

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Albertsons Companies, Inc. ACI reported fourth-quarter fiscal 2021 results, wherein both the top and the bottom lines not only surpassed the Zacks Consensus Estimate but also improved year over year. The company's focus on providing efficient in-store services, enhancing digital and omni-channel capabilities, and efforts to bolster productivity drove the quarterly results.

In spite of better-than-expected results, shares of Albertsons Companies fell 8.1% during the trading session on Apr 12. We note that management's fiscal 2022 view came below analysts' expectations, thus hurting investor sentiment.

Let's Take a Dig

Albertsons Companies posted adjusted quarterly earnings of 75 cents a share that comfortably surpassed the Zacks Consensus Estimate of 65 cents and improved sharply from 60 cents reported in the prior-year period. Higher net sales and other revenues, as well as lower SG&A expenses, contributed to the bottom-line performance.

Net sales and other revenues of this food and drug retailer were $17,383.5 million, up 10.2% year over year. The top line beat the Zacks Consensus Estimate of $16,799 million. The upside was driven by a 7.5% rise in identical sales and higher fuel sales, with retail price inflation contributing to the identical sales increase.

On a two-year stacked basis, the company's identical sales were up 19.3%. Digital sales were up 5% year on year, while the same surged a whopping 287% on a two-year stacked basis.

Albertsons Companies, Inc. Price, Consensus and EPS Surprise

Albertsons Companies, Inc. Price, Consensus and EPS Surprise
Albertsons Companies, Inc. Price, Consensus and EPS Surprise

Albertsons Companies, Inc. price-consensus-eps-surprise-chart | Albertsons Companies, Inc. Quote

Gross profit amounted to $4,984.3 million, up 9.3% year on year. However, gross margin contracted 20 basis points to 28.7%. Excluding fuel, gross margin rate was flat compared with the last year. Productivity initiatives, improved pharmacy margins and favorable product mix were offset by lower gross margin rates across certain product categories due to the rate impact of higher product costs, increase in supply chain costs and rise in LIFO expenses, on account of the current inflationary environment.

As a percentage of net sales and other revenues, selling and administrative expenses decreased 510 basis points to 24.9%. Excluding fuel and a favorable pension adjustment, selling and administrative expenses as a percentage of net sales and other revenues shriveled 30 basis points. This decline can be attributed to lower pandemic-related expenses and the execution of productivity initiatives, which were offset by increased employee expenses, higher depreciation and a jump in other costs owing to the acceleration of digital and omnichannel capabilities.

Adjusted EBITDA increased 17.1% to $1,073.7 million, while adjusted EBITDA margin expanded 40 basis points to 6.2% on a year-over-year basis.

Other Financial Details

Albertsons Companies ended the quarter with cash and cash equivalents of $2,902 million as of Feb 26, 2022. Long-term debt and finance lease obligations totaled $7,136.3 million, while total stockholders' equity amounted to $3,024.6 million.

For fiscal 2021, net cash from operating activities was $3,513.4 million. Capital expenditures during this period were nearly $1,606.5 million, involving investments toward modernization of store fleet, comprising 236 remodels and the opening of 10 new stores, as well as the building of digital and technology platforms. Management anticipates capital expenditures for fiscal 2022 between $2 billion and $2.1 billion.

Guidance

For fiscal 2022, management foresees identical sales to increase in the range of 2% to 3% against the 0.1% decline witnessed in fiscal 2021. Adjusted earnings are anticipated in the range of $2.70-$2.85 per share. This suggests a decline from adjusted earnings of $3.07. The mid-point of the earnings guidance range is below the Zacks Consensus Estimate of $2.82 for fiscal 2022.

The company expects fiscal 2022 adjusted EBITDA in the range of $4.15-$4.25 billion compared with adjusted EBITDA of $4,398 million reported in fiscal 2021.

Shares of this Zacks Rank #2 (Buy) company have surged 12.7% in the past six months against the industry's decline of 15.8%.

3 More Stocks Looking Red Hot

Here we highlight three other top-ranked stocks, namely, Kroger KR, Target TGT and Tractor Supply Company TSCO.

Kroger, the renowned grocery retailer, carries a Zacks Rank #2 at present. The company has an expected EPS growth rate of 9.9% for three-five years. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Kroger's current financial-year sales suggests growth of 2.4% from the year-ago reported number. KR has a trailing four-quarter earnings surprise of 22.1%, on average.

General merchandise retailer Target currently carries a Zacks Rank #2. TGT has an expected EPS growth rate of 16.5% for three-five years.

The Zacks Consensus Estimate for Target's current financial-year sales and EPS suggests growth of 3.5% and 6.7%, respectively, from the corresponding year-ago period's levels. TGT has a trailing four-quarter earnings surprise of 21.3%, on average.

Tractor Supply Company, a rural lifestyle retailer in the United States, carries a Zacks Rank of 2 at present. TSCO has an expected EPS growth rate of 9.8% for three-five years.

The Zacks Consensus Estimate for Tractor Supply Company's current financial-year sales and EPS suggests growth of 8.1% and 8.9%, respectively, from the corresponding year-ago period's actuals. TSCO has a trailing four-quarter earnings surprise of 22%, on average.


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