Albertsons Companies, Inc. Q4 FY2024 earnings call

• Vivek Sankaran discussed his retirement and introduced Susan Morris as the new CEO. - Fourth quarter results included ID sales growth, adjusted EBITDA, and adjusted EPS. - Strategic priorities: - Driving customer growth/engagement via digital platforms: E-commerce grew 24%, loyalty membership increased, pharmacy revenue up 18%, in-store mobile feature engaged over 9M customers. - Enhancing customer value proposition: Investing in price in certain categories/markets, amplifying own brands. - Modernizing capabilities through technology: Building best-in-class tech platforms, real-time data platform, leveraging AI. - Driving transformational productivity: $1.5B in savings over 3 years, accelerating national buying, supply chain automation, warehouse management system implementation.

In the fourth quarter, ID sales grew 2.3%, adjusted EBITDA was $855 million, and adjusted earnings per share was $0.46. E-commerce grew 24% in the fourth quarter and full year, with first-party sales outpacing third-party. Loyalty membership grew over 15% year-over-year to more than 45 million members, and actively engaged customers increased 12%. Pharmacy revenue increased 18% year-over-year. E-commerce penetration is now over 8% of grocery revenue. Revenue contribution: E-commerce, loyalty, pharmacy/health, and in-store mobile app are key segments driving growth.

• Fiscal 2025 ID sales growth expected in the range of 1.5% to 2.5% assuming inflation 1.5% to 2%. - Adjusted EBITDA expected in the range of $3.8 billion to $3.9 billion. - Adjusted EPS expected in the range of $2.03 to $2.16. - Capital expenditures expected in the range of $1.7 billion to $1.9 billion. - Expect gradual improvement in top line trends in grocery business in the second half of 2025, aiming for long-term algorithm of 2% plus identical sales and adjusted EBITDA growing higher than that in fiscal year '26.

Forward-looking statements involve risks and uncertainties such as market conditions, competitive environment, tariffs, and other potential market dislocations that could cause actual results to differ materially from anticipated.

Q: Given price investments and competitive environment, update on price gaps and breadth/depth of investments?

A: Susan Morris said no dramatic shift in consumer behavior, seeing shift to value, and taking surgical approach to price investments by category/market.

Q: Assumptions on buybacks within guidance?

A: Sharon McCollam said $1.9 billion repurchase program over next three years, equating to approx $0.06 accretion in EPS each year if bought that way.

Q: Proportion of imported goods and impact of tariffs?

A: More than 90% of products domestically sourced, deployed task force to mitigate tariff impacts.

Q: Demand growth for Albertsons Media Collective and advertiser spend?

A: Nascent in Media Collective but delivering upsized growth compared to market, optimistic about 2025 goals.

Q: Key investment buckets in 2025 and EBITDA growth cadence?

A: Multifaceted investments in digital, loyalty, customer value proposition, with cadence thoughtful throughout year, expecting stronger growth in back half of 2025 towards long-term algorithm.

Q: Q1 outlook and consumer behavior?

A: Investments in first half, expecting back half payoff, no major change in consumer behavior, consumer seeking value.

Q: Pharmacy customer engagement and wallet share?

A: Pharmacy customers evolve across platforms, with 4x basket of those not shopping pharmacy, opportunity in multiple platform engagement.

Q: E-commerce profitability and growth?

A: Largest opportunity in growing sales, proximity to customers creates productivity, scale breeds productivity, expecting E-commerce to become more profitable over time.

Q: Pharmacy growth, GLP-1 impact, and wage pressure?

A: GLP-1 contributing to growth but core script volume growing, wage growth assumption similar to 2024, SG&A impacted by wage pressure.

Q: CapEx allocation, remodels, new stores, and tariffs?

A: CapEx similar to this year, half in stores, maintenance, digital platforms, AMC; handling tariffs in way that amplifies strategic priorities.

Q: Price gaps and algo by 4Q?

A: Price gaps vary by market, surgical approach to investments; working towards long-term algorithm, expecting gradual improvement towards it.