Albertsons Companies gains after earnings topper

Albertsons Companies (NYSE:ACI) tracked higher in early trading on Tuesday after the grocery store operator topped revenue and EPS estimates with its FQ3 earnings report.

Revenue was up 2.3% year-over-year to $18.56B. The revenue increase was driven by Albertsons' (ACI) 2.9% increase in identical sales vs. +1.2% consensus, with strong growth in pharmacy sales driving the identical sales increase. The company also continued to grow its digital business with a 21% sales increase during the quarter.

Gross margin fell 28.0% of sales vs. 28.2% a year ago. Excluding the impact of fuel and LIFO expense, gross margin rate decreased 64 basis points compared to last year. Albertsons (ACI) noted that the strong growth in pharmacy operations, which carries an overall lower gross margin rate, and increases in shrink were the primary drivers of the decrease, partially offset by procurement and sourcing productivity initiatives. Breaking it down even further, the rate decrease related to pharmacy operations was primarily due to growth in pharmacy sales and a lower margin rate on COVID-19 vaccines in the quarter. In addition, the benefits from ACI's productivity initiatives allowed it to continue to provide incremental targeted price investments to customers during the quarter.

Adjusted EBITDA was $1.11B or 6.0% of net sales during the quarter, compared to $1.16B or 6.4% of net sales last year. Looking ahead to FQ4, Albertsons Companies (ACI) expects continued outsized growth and margin impact in the pharmacy and digital operations. No specific guidance was issued with the earnings release.

Shares of Albertsons Companies (ACI) were up 0.65% in premarket trading on Tuesday to $23.14 vs. the 52-week range of $19.14 to $23.88.