Albertsons (ACI) Margin Compression Reinforces Cautious Narrative Despite Stock’s Deep Valuation Discount

Albertsons Companies (ACI) posted annual revenue growth of 1.8%, falling behind the broader US market’s projected 10% pace. Net profit margins slipped slightly to 1.2% from 1.3% last year. While the company has delivered 4.4% annual earnings growth over the past five years, recent results showed negative earnings growth and a more subdued forecast, with profit expected to rise just 1.4% per year going forward. This is well below the US market’s 15.5% expectation. Shareholders may still find some comfort in ACI’s high quality of past earnings, especially as the stock trades at a steep discount to industry averages and below analyst targets, with a latest price of $19.21 compared to a DCF estimate of $39.49.

See our full analysis for Albertsons Companies.

The next section unpacks how these earnings stack up against the dominant community narratives, highlighting where numbers and stories align or diverge.

See what the community is saying about Albertsons Companies

Digital and Pharmacy Growth Fueling Engagement

• Albertsons reported a 25% surge in e-commerce sales and 20% year-over-year growth in its pharmacy and health offerings, highlighting digital and health as major levers for customer engagement and sales momentum not covered in the headline growth numbers.
• Analysts' consensus view spotlights how digital expansion, omnichannel strategies, and loyalty program gains are counterbalancing slow total revenue growth:
  • Digital and pharmacy segments are driving larger basket sizes and increased visit frequency, supporting gross margin stability.
  • This strategy is seen as vital for defending share against national and online competitors amid evolving consumer shopping patterns.
• Investors looking for the next catalyst should look beyond the headline growth rate to the company’s gains in digital and health. Analysts are watching these closely for momentum shifts. 📊 Read the full Albertsons Companies Consensus Narrative.

Margin Pressures and Labor Cost Headwinds

• Net profit margin declined from 1.3% to 1.2% year-over-year, reflecting pressure from rising labor costs and a more challenging sales mix within the pharmacy segment.
• Analysts' consensus narrative points to several operational headwinds weighing on near-term profitability:
  • Ongoing labor contract negotiations involving 120,000 associates and increased investment in wages are expected to keep SG&A expenses elevated.
  • Competitive pricing and slower realization of supply chain efficiencies could continue to challenge margin expansion despite technology upgrades.

Trading at a Steep Discount to Peers and DCF Fair Value

• With a Price-to-Earnings ratio of 10.8x and a current share price of $19.21, Albertsons trades far beneath the US Consumer Retailing industry’s average PE of 21.2x, the peer average of 24.4x, and its DCF fair value of $39.49.
• Analysts' consensus view argues this undervaluation reflects a mixture of skepticism about future growth and caution over recent margin pressures, but also optimism about the company's operational upgrades:
  • Analyst price targets are set 23% higher than today’s share price. This suggests room for a rerate if margin and digital momentum firm up.
  • Attractive pricing compared to the sector may offer upside if Albertsons can deliver on execution and industry trends turn favorable.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Albertsons Companies on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your Albertsons Companies research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

See What Else Is Out There

With sluggish near-term profit growth and margin pressures weighing on Albertsons, its performance lags the steady expansion investors often seek from established industry players.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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