Albertsons Companies, Inc. FY24 10‑K Review: Balancing Scale, Innovation and Financial Discipline

By: [Your Name], Tenured Investment Consultant

Warren.AI 💰 6.5 / 10

Executive Summary

Albertsons Companies, Inc. (NYSE: ACI) is one of the largest food and drug retailers in the United States. With 2,270 supermarkets, 1,728 pharmacies and 405 fuel centers across 34 states and the District of Columbia, the Company leverages national scale while retaining local differentiation. Its banners include Albertsons, Safeway, Vons, Jewel‑Osco, Shaw’s, Tom Thumb, Carrs and others.

Highlights for fiscal year 2024 (52 weeks ended February 22, 2025) include:  • Revenue: $80.39 billion (+1.5% yoy)  • Identical sales (ex‑fuel): +2.0%  • Digital sales: +24%, supported by curbside pickup and home delivery partnerships (Instacart, DoorDash, Uber, Grubhub)  • Loyalty members: 45.6 million (+15%)  • Net income: $958.6 million (vs. $1.30 billion in FY23)  • Adjusted EBITDA: $4.005 billion (5.0% margin)  • Leverage: $7.5 billion of long‑term debt; net debt/Adjusted EBITDA ≈1.8x  • Capital allocation: $1.93 billion capex in remodels, tech and digital; $295 million dividends; $82 million share buybacks

Albertsons sustains competitive advantages through its 1–2 market share position in 66% of its 122 MSAs, an expanding omnichannel platform, a differentiated Own Brands portfolio with over 14,000 SKUs and the Albertsons Media Collective—the retailer’s nascent in‑store advertising network.

1. Item 1 – Business Description

Core Operations & Scale

Albertsons operates full‑service grocery and drug stores. Key metrics as of FY24 end:

• 2,270 stores across 34 states & DC
• #1 or #2 market share in 66% of operating MSAs
• 1,728 in‑store pharmacies; 1,313 branded coffee shops
• 405 fuel centers; 22 distribution centers; 19 manufacturing plants
• 45.6 million loyalty members
• 36.2 million customers served weekly

The “Locally Great, Nationally Strong” model devolves local merchandising & marketing decisions to divisions while centralizing eCommerce, supply chain, media network and finance for leverage.

Digital & Loyalty

- Drive Up & Go curbside pickup and home delivery now in >2,200 stores. - Partnerships with Instacart, DoorDash, Uber and Grubhub bolster reach. - Digital sales +24% in FY24, now a high‑margin growth lever. - 45.6 million loyalty members (up 15%), driving personalized deals, coupons, fuel & grocery rewards.

Own Brands

• 14,000 SKUs under labels such as Signature SELECT, O Organics, Lucerne, Waterfront BISTRO.
• FY24 Own Brands sales: $16.4 billion.
• In FY24, 10.5% manufactured in‑house; remainder sourced third party.
• Innovation highlights: Bee Lightly flat wine bottle (87% lighter glass; 100% recycled).

Merger & Regulatory

Albertsons and Kroger agreed to combine in October 2022. The deal faced state/federal challenges and was preliminarily enjoined by the FTC in December 2024. The parties terminated the merger agreement, and legal battles over termination fees ensued.

2. Financial Analysis (Items 7, 7A & 8)

Revenue & Same‑Store Sales

FY24 net sales and other revenue: $80.39 billion vs $79.24 billion in FY23 (+1.5%).

• Identical sales ex‑fuel: +2.0% (pharmacy was key driver)
• Fuel sales down 9.5% (volume & lower prices)
• New store net adds: +11 openings vs –10 closures

Segment mix FY24 vs FY23:

• Non‑perishables (grocery/GM/dairy/frozen): 49.9% of revenue
• Fresh (produce/meat/deli/bakery/seafood): 31.7%
• Pharmacy: 11.9%
• Fuel: 5.0%
• Other (wholesale, media, commissions): 1.5%

Gross Margin

Gross margin rate: 27.7% of revenue vs 27.8% in FY23. Adjusted for fuel & LIFO, gross margin down 34 bps due to:

• Lower pharmacy reimbursement rates
• Higher delivery & fulfillment costs (digital)
• Brand investments (promotional markdowns)
• Productivity gains from supply chain, purchasing & Lean store initiatives

OpEx & Adjusted EBITDA

Selling & administrative expenses: 25.6% of revenue vs 25.2% in FY23 (+34 bps ex‑fuel). Drivers:

• Digital & omnichannel investments
• Merger‑related legal & advisory fees
• Higher labor costs & security spend
• Advertising & marketing (AMC buildout)
• Productivity offset

Operating income: $1.55 billion vs $2.07 billion in FY23 Adjusted EBITDA: $4.005 billion (5.0% margin) vs $4.318 billion (5.4%) in FY23

Net Income & EPS

- Net income $958.6 million vs $1,296.0 million FY23 - Diluted EPS $1.64 vs $2.23; FX, tax settlements & LIFO burden impacted comparatives - Adjusted net income $1.38 billion vs $1.69 billion - Adjusted diluted EPS $2.34 vs $2.88

Cash Flow & Leverage

- Operating cash flow: $2.68 billion vs $2.66 billion in FY23 - Capital expenditures: $1.93 billion for remodels, 11 new stores, digital capex - Free cash flow: ~$0.75 billion (operating CF – capex) - Dividends: $295 million (0.51 c/sh) vs $276 million in FY23 - Share buybacks: $82.5 million in FY24; $0 in FY23

Debt & liquidity: - Total debt incl. Leases: $7.82 billion (7.50 billion net of discounts) - ABL Facility availability: $3.97 billion undrawn - Net debt/Adjusted EBITDA ~1.8x Interest rate: ~5.6% weighted avg. Liquidity: ~$0.29 billion cash; $4 billion+ revolver avail.

3. Item 1A – Risk Factors in Brief

• Economic downturn, inflation/deflation, consumer spending downturns • Sharp rises in labor costs, union negotiations & pension funding (multiemployer plans o/s $4.9 billion underfunded) • Cybersecurity & data privacy exposures • Supply chain disruption (fresh & perishables); commodity price volatility • Intense competition (supercenters, discounters, e‑tailers) • Regulatory, legal proceedings (opioid litigation; PBM cases; frozen Merger litigation)

4. Item 1B – Unresolved Staff Comments

None

5. Item 2 – Properties

2,270 stores; 113.0 million sq ft:

• <30k sq ft: 214 stores; 4.9% of sq ft
• 30–50k sq ft: 777 stores; 32.6% sq ft
• >50k sq ft: 1,279 stores; 75.5% sq ft Land/leases: 39% owned retail; 52% owned industrial

6. Item 3 & 1C – Legal & Cybersecurity

• No material pending legal contingency reserves outside FCA, PBM and opioid matters. • Proctor & Schutte FCA cases remanded; • PBM litigation vs Prime in MN; MDL opioid suits; IDed settlements in NM & NV for $21.5 million. • Cybersecurity: mature 24×7 SOC+MSSPs, risk assessments, incident response & quarterly controls reporting.

7. Items 8 & 15 – Financials & Segment

All operations represent 1 reportable segment managed via Retail segment EBITDA.

Investment Potential & Risks

Albertsons’ scale ( #1–2 share ), omnichannel execution (digital + loyalty), Own Brands strength and deep local reach support its core growth. Digital is a key high‑margin engine, with double‑digit expansion in sales. AMC offers long‑term adjacencies into retail media. Healthy Free Cash Flow and sub‑2x leverage enable continued capex, dividends and buybacks.

Key risks: tight low‑margin retail environment, margin pressure from labor and energy, pension funding volatility, legal & regulatory uncertainties (opioids, PBM, Merger litigation), and digital profitability sustainability.

Investment Score 6.5/10

Albertsons earns a  investment score. The retail business remains challenging, yet the Company’s competitive positioning, omnichannel build‑out, improving digital economics and strong Free Cash Flow support a positive outlook. Risk/reward is balanced, with net leverage at conservative levels but legal and labor exposures warrant caution.