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Investors are shopping their Albertsons (ACI -7%) shares today after the national grocery store chain issued downbeat FY26 (Feb) earnings guidance. The company still managed to top Q4 earnings and revenue expectations while delivering healthy identical sales growth. Meanwhile, the midpoint of ACI's FY26 comp guidance topped estimates. However, following a decent +10% run on the year ahead of Q4 numbers as well as general uneasiness surrounding weakening consumer confidence amid dynamic tariff policies, market participants did not need many negative developments to ignite a sell-off today.

There has been no shortage of headlines surrounding ACI since December, when the company terminated its pending merger with Kroger (KR) after federal and state courts blocked the deal. At the time, ACI authorized a $2.0 bln repurchase plan, representing around 16% of its market cap, and hiked its quarterly dividend by 25%. Then, last month, ACI announced that its COO Susan Morris would take over as CEO, effective May 1, replacing Vivek Sankaran, who is retiring. The CEO shakeup triggered a sell-the-news event. However, news that ACI would join the S&P MidCap 400 occurred the next day, whiting out the negative segment.

• Nevertheless, today's downbeat outlook was sufficient to push the stock toward 2025 lows. ACI projected adjusted EPS of $2.03-2.16, firmly below analyst expectations. The underlying cause is ACI's investments related to its Customer for Life strategy, which management noted last quarter would begin accelerating, aiming to achieve at least +2% comps over time with adjusted EBITDA growth outpacing comp growth.
• Central to ACI's investments are bolstering its digital platforms and modernizing its store fleet. The company is also strengthening its relationships with partners to address inflationary pressures on its customers. ACI is also investing in its private labels to increase profitability while taking advantage of shoppers' needs for greater value. Additionally, ACI wants to improve its ability to define shopper audiences and run targeted media campaigns. Management cautioned that the result of these investments will be a short-term hit to margins.
• Outside of ACI's disappointing earnings outlook, other trends were healthy. During Q4, e-commerce sales grew by 24% yr/yr, far outpacing overall revenue growth of 2.5% to $18.8 bln and identical sales growth of +2.3%. Loyalty members rose by 15% yr/yr to 45.6 mln, reflecting success related to ACI's mobile app, which offers personalized deals and rewards points. Lastly, ACI projected solid comps for FY26, targeting +1.5-2.5%, within its long-term Customer for Life strategy range.
• Regarding tariffs, ACI procures over 90% of its products domestically. However, ACI is aware that there may be impacts from ingredients within these products that are sourced from tariff-impacted areas. As such, it is staying close to the situation, deploying a task force to better understand the complexities and having a plan ready to help mitigate any possible adverse impacts.

Overall, ACI delivered a decent Q4 report, underscoring healthy demand and reflecting the defensive nature of its business. However, investors are displeased by the degree to which ACI's earnings will suffer at the hands of its Customer for Life strategy, taking some of their profits off the table today.