Albertsons Companies, Inc. (ACI) saw its stock decline after reporting fourth-quarter results for February. The supermarket chain, which operates brands including Albertsons, Safeway, and Vons, delivered earnings per share that exceeded expectations. However, revenue of $20.25 billion, while up 7.7% year-over-year and marking the strongest growth since the third quarter of 2022, fell short of market forecasts. A key positive was the fiscal 2027 guidance, which projects earnings per share in the range of $2.22 to $2.32, closely aligning with expectations. Identical store sales are anticipated to be flat to up 1%.

The growth rate for identical store sales slowed to 0.7% from 2.4% in the third quarter. This deceleration was primarily due to significant headwinds in the pharmacy business, which created a drag of 145 basis points, exceeding the anticipated 65-70 basis point impact from pricing and mix effects related to the Inflation Reduction Act.

Digital sales continued to show strong performance, increasing by 16%, with penetration exceeding 10% in the fourth quarter. Nearly 90% of this growth was driven by first-party business.

Gross margin slightly declined to 27.2%, down 25 basis points year-over-year, mainly due to mix impacts from the accelerated growth of the digital business. Albertsons expects gross margin to remain stable or improve slightly as fiscal 2027 progresses.

Consumer trends indicated that unit sales were under pressure for lower-income households, while middle- and higher-income consumers remained relatively stable, though cross-shopping behavior remained elevated.

Pressure on the pharmacy business related to the Inflation Reduction Act is expected to create a headwind of 150 basis points. Excluding this effect, the outlook for identical store sales growth is approximately 1.5% to 2.5%, suggesting that the underlying trend remains stable compared to the 2.0% increase in fiscal 2026. The first quarter is anticipated to be the weakest period for identical store sales.

Albertsons has raised its quarterly dividend by 13% to $0.17 and expanded its share repurchase program to $2 billion.

In summary, Albertsons concluded fiscal 2026 with mixed performance: while earnings per share beat expectations, revenue fell short of targets due to pharmacy-related headwinds from the Inflation Reduction Act materializing faster than anticipated. On a positive note, digital sales remained robust, and margins were stable, with this performance expected to continue into fiscal 2027. However, concerns persist regarding consumer spending, particularly among lower-income groups, and ongoing pharmacy-related challenges in the first quarter may impact overall results. The long-term outlook for the digital business, pharmacy operations, and productivity remains positive, but today's revenue miss and pharmacy headwinds are exerting pressure on the stock price.