Boise / ID. (abc) Albertsons Companies reported results for the fourth quarter of fiscal 2023 and full year fiscal 2023, which ended February 24, 2024.
Fourth Quarter of Fiscal 2023 Highlights
- Identical sales increased 1.0 percent
- Digital sales increased 24 percent
- Loyalty members increased 16 percent to 39.8 million
- Net income of USD 251 million, or USD 0.43 per share
- Adjusted net income of USD 318 million, or USD 0.54 per share
- Adjusted Ebitda of USD 916 million
Fiscal 2023 Highlights
- Identical sales increased 3.0 percent
- Digital sales increased 22 percent
- Net income of USD 1,296 million, or USD 2.23 per share
- Adjusted net income of USD 1,694 million, or USD 2.88 per share
- Adjusted Ebitda of USD 4,318 million
«We delivered another solid quarter amidst a difficult industry backdrop,» said Vivek Sankaran, CEO. «Again this quarter, we focused on our strategy to create Customers for Life, which drove strong growth in digital and pharmacy, deepened our omnichannel relationships with our customers and improved our in-store experience. We are pleased with our fiscal 2023 financial results, particularly in omnichannel where we have increased our investments in technology, digital and in-store customer experience and supply chain operations. We want to thank all of our teams who continue to deliver on our commitment to serving our customers and communities.»
Sankaran added, «As we look forward to fiscal 2024, we will continue investing in our Customers for Life strategy and developing the digital and omnichannel capabilities necessary to support it. Our Customers for Life strategy is placing the customer at the center of everything we do, with the ultimate goal of supporting them every day, every week, and for a lifetime. It is a multi-year journey that we will continue to build on in fiscal 2024 as we invest in capabilities that allow us to digitally connect and further engage our customers through a frictionless omnichannel experience, enhance what we offer, modernize our operational capabilities and transform our ways of working.»
Sankaran concluded, «At the same time, we expect to face ongoing headwinds posed by investments in associate wages and benefits, cycling significant prior year food inflation, lower government assistance for our customers, declining Covid-related income, and the increasing mix of our pharmacy and digital businesses, which carry lower margins. We expect these headwinds to be much stronger in the first half of fiscal 2024. These headwinds are expected, however, to be partially offset by ongoing productivity initiatives.»
Fourth Quarter of Fiscal 2023 Results
Net sales and other revenue was USD 18.3 billion during both the 12 weeks ended February 24, 2024 (fourth quarter of fiscal 2023) and the 12 weeks ended February 25, 2023 (fourth quarter of fiscal 2022). Net sales and other revenue during the fourth quarter of fiscal 2023 were driven by a 1.0 percent increase in identical sales, partially offset by lower fuel sales and wholesale revenue. Strong growth in pharmacy sales drove the identical sales increase. We also continued to grow our digital business with a 24 percent sales increase during the fourth quarter of fiscal 2023.
Gross margin rate increased to 28.0 percent during the fourth quarter of fiscal 2023 compared to 27.8 percent during the fourth quarter of fiscal 2022. Excluding the impact of fuel and LIFO, gross margin rate decreased 58 basis points compared to the fourth quarter of fiscal 2022. The strong growth in pharmacy operations, which carries an overall lower gross margin rate, increases in shrink, and increases in picking and delivery costs related to the continued growth in our digital sales were the primary drivers of the decrease, partially offset by our procurement and sourcing productivity initiatives. In addition, the benefits from our productivity initiatives allowed us to continue to provide incremental targeted price investments to our customers during the fourth quarter of fiscal 2023.
Selling and administrative expenses decreased to 25.7 percent of Net sales and other revenue during the fourth quarter of fiscal 2023 compared to 25.8 percent during the fourth quarter of fiscal 2022. Excluding the impacts of fuel and a legal settlement in the fourth quarter of fiscal 2022, Selling and administrative expenses as a percentage of Net sales and other revenue increased 13 basis points. The increase in Selling and administrative expenses as a percentage of Net sales and other revenue was primarily attributable to an increase in operating expenses related to the ongoing development of our digital and omnichannel capabilities, ongoing Merger-related costs, increased store occupancy costs and additional third-party store security services, partially offset by lower employee costs, which includes the benefit of ongoing productivity initiatives, and lower depreciation and amortization. We expect a continued trend in increased digital spend as we enhance and maintain the modernization of our technology platforms.
Net loss on property dispositions and impairment losses was USD 0.8 million during the fourth quarter of fiscal 2023 compared to net gain of USD 61.4 million during the fourth quarter of fiscal 2022.
Interest expense, net was USD 109.0 million during the fourth quarter of fiscal 2023 compared to USD 91.6 million during the fourth quarter of fiscal 2022. The increase in interest expense, net was primarily attributable to lower interest income.
Other expense, net was USD 2.4 million during the fourth quarter of fiscal 2023 compared to other income, net of USD 9.5 million during the fourth quarter of fiscal 2022.
Income tax expense was USD 64.3 million, representing a 20.4 percent effective tax rate, during the fourth quarter of fiscal 2023, compared to USD 40.4 million, representing an 11.5 percent effective tax rate, during the fourth quarter of fiscal 2022. The increase in the effective tax rate was the result of certain federal statutes expiring in the fourth quarter of fiscal 2022 and the related reduction in reserves for uncertain tax positions.
Net income was USD 250.5 million or USD 0.43 per share during the fourth quarter of fiscal 2023. Net income was USD 311.1 million or USD 0.54 per share during the fourth quarter of fiscal 2022, which included a USD 43.5 million or USD 0.07 per share benefit related to the reduction in reserves for uncertain tax positions in the fourth quarter of fiscal 2022.
Adjusted net income was USD 318.0 million, or USD 0.54 per share during the fourth quarter of fiscal 2023 compared to USD 459.7 million, or USD 0.79 per share (which includes the USD 0.07 per share tax benefit discussed above), during the fourth quarter of fiscal 2022.
Adjusted Ebitda was USD 915.8 million during the fourth quarter of fiscal 2023 compared to USD 1,050.2 million during the fourth quarter of fiscal 2022.
Capital Expenditures
During fiscal 2023, capital expenditures were USD 2,031.3 million, which primarily included the completion of 150 remodels, the opening of six new stores and continued investment in our digital and technology platforms.
Merger Agreement
As previously announced, on October 13, 2022, the Company entered into an Agreement and Plan of Merger with The Kroger Company and Kettle Merger Sub, Inc. Under the terms of the Merger Agreement, subject to regulatory approval, Kroger (through Kettle Merger Sub Inc.) will acquire all of the outstanding shares of the Company’s common stock. Details regarding the Merger Agreement and the transactions contemplated by the Merger Agreement are available in our Annual Report on Form 10-K for fiscal 2023 filed with the Securities and Exchange Commission (SEC) on April 22, 2024.
