Updates share move, adds milestone

By Juveria Tabassum

July 23 (Reuters) - Albertsons ACI.N shares slumped as much as 24.5% on Thursday, on pace for their worst day, after the grocer cut its annual core sales and profit forecasts while accelerating investments in prices to better compete for cash-strapped shoppers.

Higher gas and food prices have forced U.S. households to become more selective in their spending and shop more at mass retailers such as Walmart WMT.O and private-label and discount grocers, including Aldi, hurting sales at Albertsons and peers.

"Core grocery faced increasing pressure from softer industry unit trends and a more cautious consumer," Albertsons CEO Susan Morris said in a statement.

The "biggest leakage" of lower-income customers was to big pure-price players such as Walmart and Amazon, Morris said in a post-earnings call, pointing to rivals also investing more to keep prices low.

Albertsons expects annual identical sales to decline in the range of 0.5% to 1.5%, compared with its prior target of flat to up 1%.

Identical sales declined 0.8% in the first quarter and are expected to show very modest improvement through the year, executives said on the call.

Meanwhile, fuel and packaging costs are expected to rise through the year as the war in Iran escalates. U.S. gasoline pump prices crossing the $4 a gallon mark again could also weigh on consumer spending.

Albertsons plans to negotiate with suppliers to keep prices low and was not currently passing on the higher costs to consumers.

The company's gross margin rate decreased 23 basis points in the second quarter, following a 25 basis point decline in the preceding three-month period.

"The read across is that industry trends and competition remain challenging for Kroger and Sprouts Farmers Market," said Evercore ISI analyst Michael Montani.

Rival Kroger's KR.N shares dropped 3%, while Sprouts Farmers Market SFM.O was down about 1%. Albertsons shares were down 21.8% at $11.40 in afternoon trading.

RAMPING UP INVESTMENTS

As its core middle- and lower-income consumers trade down, Albertsons has already cut prices on hundreds of items, invested in improving its e-commerce channel to compete on convenience, and doubled down on its private label brands.

"We are choosing to accelerate investments in our customer value proposition and the customer experience ahead of expected productivity benefits because we believe these actions will improve our growth trajectory," Morris said.

The company plans to restructure its operating model into four regional units from 11 divisions and speed up efforts to centralize merchandising functions such as pricing, promotions and supplier relationships to improve store performance.

Meanwhile, Albertsons said its chief financial officer, Sharon McCollam, will retire later this year.

"McCollam is very well-regarded by the investment community, so we expect this news to be viewed as a negative — especially given current business challenges," said RBC Capital Markets analyst Steven Shemesh.

Albertsons estimated fiscal 2026 adjusted earnings per share in the range of $1.75 to $1.85, compared with its earlier target of $2.22 to $2.32.