By Anuja Bharat Mistry
(Reuters) -Albertsons raised its annual sales forecast and beat first-quarter estimates on Tuesday, leaning on its competitive pricing strategy to ensure steady demand for essentials at its grocery stores and pharmacies despite inflationary pressures.
While the rest of the retail sector struggles with weak demand, U.S. grocers such as Albertsons and Kroger are attracting value-conscious shoppers, helping them raise their annual forecasts for same-store sales.
However, shares of Albertsons fell 5% as it left its annual adjusted profit outlook unchanged, with first-quarter gross margin dropping to 27.1% from 27.8% a year ago, due to higher delivery and handling costs and investments.
“The main concern remains the company’s ability to manage inflationary overhead expense including labor costs, while reinvesting back into customer value proposition and narrowing competitive price gaps,” said Michael Montani, analyst with Evercore ISI.
Several companies, including retail giant Walmart, have refrained from providing forecasts or pulled back in the light of rising tariff pressures.
Albertsons now expects annual identical sales to grow between 2% and 2.75%, compared with its prior range of 1.5% to 2.5%. For the first quarter, it rose 2.8% compared to 1.4% increase a year ago, on strong growth in pharmacy sales.
“Grocery store pharmacies are gaining from closures of traditional drugstores, while more people are buying fresh food as a cheaper, healthier alternative to dining out or consuming snacks,” said Arun Sundaram, analyst with CFRA Research.
Albertsons’ quarterly sales of $24.88 billion, edged past analysts’ estimates of $24.73 billion, as per data compiled by LSEG, while its adjusted profit of 55 cents per share beat estimates of 53 cents.
(Reporting by Anuja Bharat Mistry in Bengaluru; Editing by Tasim Zahid and Arun Koyyur)
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