Albertsons Companies (NYSE: ACI) is moving to streamline its store footprint, announcing plans to shutter 12 locations during 2026. This represents a modest 0.5% reduction from its current total of 2,244 stores, a move that underscores the pressure the grocery chain is facing in a competitive market.
Closures and margin pressure
The closures, which include stores under the Albertsons, Safeway, Vons, ACME, and Randalls banners, are part of what the company describes as standard portfolio management. However, the limited scale of the closures is unlikely to reverse the broader trend of declining sales and squeezed margins. In the first quarter, identical sales fell 0.8%, while adjusted earnings missed forecasts.
Gross margin also contracted, dropping 23 basis points to 26.6% (excluding fuel and LIFO), as the company invested more heavily in pricing and loyalty initiatives. Despite these headwinds, digital sales grew 13% and the company's e-commerce operations achieved profitability.
ACI Edge: The key to future savings
Management is pinning its hopes on the ACI Edge initiative, a comprehensive restructuring that will consolidate 11 divisions into four regional units. The program is expected to generate approximately $200 million in annual savings, with the majority of the impact anticipated in fiscal 2027. This cost-cutting effort is seen as crucial for offsetting ongoing margin pressures.
CEO Susan Morris acknowledged the challenges, stating, "While pharmacy and digital delivered strong growth, their performance was not enough to offset broader pressures in our core business."
Market reaction and analyst outlook
Shares of Albertsons closed Friday at $12.42, up 2.4% for the week, giving the company a market value of roughly $6.1 billion. The stock's performance mirrored that of Walmart, which also gained 2.3%, while other grocery peers like Kroger (NYSE: KR) and Costco (NASDAQ: COST) saw more modest gains. Sprouts Farmers Market (NASDAQ: SFM) declined 3.3%.
Analysts remain cautious, with post-earnings price targets ranging from $11 to $16. This implies potential downside of 11% to upside of 29% from Friday's close. Recent insider buying, including CEO Morris's purchase of 39,409 shares at an average price of $11.40, suggests some confidence in the company's direction.
Financial guidance and risks
For fiscal 2026, Albertsons projects identical sales to decline between 1.5% and 0.5%, with adjusted earnings per share of $1.75 to $1.85 and adjusted EBITDA in the range of $3.55 billion to $3.63 billion. Risks include prolonged food deflation, increased price competition, and reduced customer traffic, any of which could offset savings from closures. Delays in executing ACI Edge could also push benefits beyond fiscal 2027.
Looking ahead, investors will be watching unit volumes, gross margin trends, and the pace of regional consolidation rather than the mere number of store closures. The sustainability of the recent rebound will depend on these metrics.
