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Albertsons (ACI) is trading lower after reporting its Q4 (Feb) results this morning. The grocer, with banners like Albertsons, Safeway, and Vons, beat EPS expectations, while revenue increased 7.7% yr/yr to $20.25 bln, which missed expectations despite marking its strongest growth since Q3 2022. A big focus, however, was on FY27 guidance, with EPS of $2.22-2.32 roughly in line with expectations, while identical sales are expected to range from flat to +1%.

• ID sales decelerated to +0.7% from +2.4% in Q3, as a larger-than-expected pharmacy headwind created an approximately 145 bp drag, well above the roughly 65-70 bp impact expected, driven by IRA-related pricing and mix pressure.
• Digital remained a bright spot, with sales increasing 16% and penetration surpassing 10% in Q4. Nearly 90% of that growth came from first-party business.
• Gross margin declined modestly to 27.2%, down 25 bps yr/yr, largely reflecting the mix impact from outsized digital growth. ACI expects margin to be flat to slightly better as FY27 progresses.
• On the consumer side, ACI continues to see pressure on units among lower-income households. By contrast, middle- and higher-income consumers were described as relatively more stable, though cross-shopping remains elevated.
• IRA-related pharmacy pressure is expected to create a roughly 150 bps headwind. Excluding that impact, the outlook implies ID sales growth of around 1.5-2.5%, suggesting relatively steady underlying trends versus FY26's 2.0% increase. Q1 is expected to be the softest quarter for ID sales.
• ACI also increased its quarterly dividend 13% to $0.17, and increased its stock repurchase program to $2 bln.

Briefing.com Analyst Insight

ACI delivered a mixed close to FY26. It beat EPS expectations, but revenue missed, largely reflecting Inflation Reduction Act-related headwinds on pharmacy items that accelerated faster than expected. Encouragingly, digital continues to be a bright spot, while margins held up relatively well despite the headwinds and are expected to remain fairly steady through FY27. However, there is still some caution on the consumer side. ACI continues to see pressure among lower-income cohorts, while elevated cross-shopping likely remains a drag on fully capturing customer trips. The expectation that IRA-related headwinds will continue into Q1 also appears to be weighing. Overall, the longer-term support story around digital, pharmacy, and productivity remains intact, but the revenue miss and sharper-than-expected pharmacy headwind appear to be what is weighing on the stock today.