Albertsons sales forecast bump overshadowed by margin pressure

Albertsons Cos. raised its sales forecast for the full year, but left its earnings outlook unchanged amid pressure on margins.

The nation’s second-biggest supermarket chain said it expects identical sales to grow as much as 2.75%, versus previous guidance for a gain as high as 2.5% increase.

The shares declined 4.3% at 9:37 a.m. The stock had gained about 13% this year through Monday.

Shoppers have prioritized spending on groceries and other essentials in recent years due to inflation. Seeking value, they have also flocked toward low-cost store brands and discounts. These forces have enabled Albertsons and other food retailers to post steady growth.

The grocer left its earnings outlook unchanged, suggesting that margins will face some pressure. Its gross margin narrowed in the first quarter on investments in some areas of the operations, such as pharmacy.

Comparable sales in the first quarter beat expectations with growth of 2.8% on higher pharmacy and digital sales. That topped the average analyst estimate of 2.06%.

Boise-based Albertsons is seeking to fuel further growth under new Chief Executive Officer Susan Morris and a failed deal with its bigger rival Kroger Co.

Tariff chaos and weak sentiment are creating new challenges for consumer-facing companies, though grocers have said they anticipate a smaller impact from the levies than other retailers.

Higher costs of goods from tariffs are “moving ahead” for packaged goods companies, and Albertsons is working to examine such increases and push back, Morris said on a call with analysts.

While the company sources the vast majority of its products domestically, it will look at alternative sourcing if needed.

“We continue to see the customer seeking value,” Morris said, adding that the grocer is selling more on promotion and leaning into store brands.

Pork and ground beef have been among the best-selling products in recent months as people look to save money, while deli chicken has also been popular because ease is important to shoppers.

Competitors continue to invest in promotions, she said, though the pricing environment remains consistent and there aren’t broad changes across the industry.