Breaking Down Albertsons Companies, Inc. (ACI) Financial Health: Key Insights for Investors

You are looking at Albertsons Companies, Inc. (ACI) and seeing a mixed signal: the company pulled in a massive $80.39 billion in revenue for the 2025 fiscal year, but net income still took a sharp hit, declining by over 26% to $958.6 million. That gap between top-line growth and bottom-line pressure is the core tension here, and it's why a deep dive into their financial health is defintely needed before you make a move. The good news is their strategic investments are paying off, with Q2 2025 net sales hitting $18.92 billion and digital sales surging by 23%. Still, you can't ignore the balance sheet; with total debt sitting at $14.18 billion, the net debt-to-EBITDA ratio is approximately 3.97x, which is a moderate but persistent leverage profile for a major grocer. The management's confidence is clear, though-they just announced a $750 million accelerated share repurchase, pushing the full-year adjusted EPS outlook up to a range of $2.06 to $2.19 per share. We need to see if that operating strength can outrun the margin compression and service that debt load.

Revenue Analysis

If you're looking at Albertsons Companies, Inc. (ACI), the first thing to grasp is that their revenue story in fiscal year 2025 is one of steady, but slowing, growth that's being masked by a significant internal shift. The company's annual revenue for the fiscal year ending February 22, 2025, hit approximately $80.39 billion, a modest 1.46% increase year-over-year. That's a decent number, but it's defintely slower than what we've seen in the past, so we need to look deeper into where that money is coming from.

The core of Albertsons Companies, Inc.'s revenue remains the sale of food and drug items across its nearly 2,300 stores, which operate under various banners. The vast majority-around 80%-of sales come from nonperishable and fresh food, including a strong push in their private brands (own-label products), which helps with margin control. The real action, though, is in the ancillary segments, which are becoming disproportionately important for future growth.

Shifting Revenue Drivers: Digital and Pharmacy

The biggest change in the revenue mix isn't a new segment, but a dramatic acceleration in two existing ones: digital and pharmacy. These are the areas driving identical sales growth, which is the sales comparison for stores open for at least a year. For the second quarter of fiscal 2025, identical sales grew 2.2% (adjusted), and the primary fuel for that was pharmacy.

Here's the quick math on where the momentum is:

• Digital Sales: Surged 23% year-over-year in Q2 2025, reflecting success in their omnichannel (selling both in-store and online) strategy.
• Pharmacy/Health: Saw a strong growth rate of around 20% year-over-year, which is a high-volume, lower-margin business, but crucial for customer retention.
• Loyalty Members: Grew 13% to 48.7 million, meaning more engaged customers who spend more over time.

This strong growth in digital and pharmacy is fundamentally changing the gross margin profile. To be fair, the increased pharmacy sales, which carry a lower gross margin rate, plus higher delivery and handling costs from the digital surge, actually caused the overall gross margin rate to decrease to 27.0% in Q2 2025 from 27.6% in the prior year. This is a classic trade-off: you gain market share and customer engagement, but you pay for it in near-term margin pressure.

The Near-Term Headwinds

While the core grocery business is stable, and digital is a rocket, one segment has been a clear drag: fuel sales. Lower fuel sales partially offset the overall increase in net sales and other revenue during the second quarter of fiscal 2025. This is a cyclical risk for any retailer that operates fuel centers, but it's an important reminder that not all revenue is created equal.

Looking at the trailing twelve months (TTM) ending September 6, 2025, the total revenue reached $81.37 billion, a 2.08% TTM growth. This shows a slight acceleration in the latter half of the fiscal year, which is a positive sign for investors.

For a closer look at the corporate structure and key players, you should read Exploring Albertsons Companies, Inc. (ACI) Investor Profile: Who's Buying and Why?

Profitability Metrics

You're looking at Albertsons Companies, Inc. (ACI) and seeing a stock that trades at a steep discount to its peers, and you want to know if the profitability is the reason. The short answer is yes, margins are thin and under pressure, but the company is fighting back with a clear operational efficiency plan.

In the grocery retail world, margins are defintely tight, and Albertsons is no exception. For the fiscal year ending in 2025, the company's profitability ratios show a clear squeeze, but they are still largely within the typical, albeit low, range for a supermarket chain.

• Gross Profit Margin: The FY 2025 margin stood at approximately 27.6%.
• Operating Profit Margin: This metric, which shows profit before interest and taxes, was compressed to about 1.92% for FY 2025.
• Net Profit Margin: The final take-home profit was a razor-thin 1.19% for FY 2025, down from 1.64% the prior year.

Here's the quick math: for every dollar in sales, Albertsons is keeping just over a penny as net profit. That's a tough business. You can dive deeper into the full financial picture by checking out the Breaking Down Albertsons Companies, Inc. (ACI) Financial Health: Key Insights for Investors post.

Margin Trends and Industry Benchmarks

The trend is the main concern here. Albertsons' profitability has been declining, which is why the market is cautious. For example, the operating income (EBIT) for 2025 was $1.546 billion, a sharp 25.27% decline from 2024. This margin compression is a direct result of two key factors: rising labor costs and a shift in sales mix.

To be fair, the grocery industry operates on notoriously slim margins. The industry median net profit margin for U.S. listed grocery companies is around 2.3%, and the typical range is 1% to 3%. Albertsons' 1.19% net margin is at the low end of that range and well below the median, but its gross margin of 27.6% is very close to the 2024 industry median of 27.8%. This suggests the core problem isn't buying product cheaply (Gross Margin), but rather managing the costs of running the business (Operating and Net Margins).

Operational Efficiency and Cost Management

The pressure on the gross margin is driven by a mix shift: strong growth in pharmacy sales and digital sales. Pharmacy sales carry a lower gross margin rate, and the 23% surge in digital sales in Q2 FY2025 brings higher delivery and handling costs. This isn't a failure, but a cost of modernizing the business. You have to spend money to secure that digital customer.

The good news is that Albertsons' management is laser-focused on operational efficiency (OpEx). They are executing a productivity engine expected to deliver $1.5 billion in savings through 2027, primarily through AI, automation, and technology investments. This is already showing up in their Selling, General, and Administrative (SG&A) expenses, which dropped to 25.4% of net sales, a 40 basis-point improvement, helping to offset rising wages. The goal is to fund growth and offset inflation, and that's the right move.

Next Step: Portfolio Manager: Model the impact of the projected $1.5 billion in OpEx savings on the net margin over the next three years to see the true earnings power.

Debt vs. Equity Structure

Albertsons Companies, Inc. (ACI) leans heavily on debt financing, a clear signal of its financial strategy, which is typical for a business that was private equity-owned for a long time. For the quarter ending August 2025, the company's total debt-combining short-term and long-term obligations-stood at approximately $14.57 billion. That's a significant number, but it's the structure that matters most for investors.

The total debt is primarily long-term, sitting at about $12.65 billion, with short-term debt at $1.92 billion for the same period. The high level of debt is a double-edged sword: it boosts returns when the business is thriving, but it makes the company vulnerable if cash flow slows. This is a capital-intensive business, so this is defintely a key metric to watch.

Here's the quick math on leverage: Albertsons Companies, Inc.'s Debt-to-Equity (D/E) ratio for the quarter ending August 2025 was approximately 4.73 (or 473.0%). This means the company uses nearly five dollars of debt for every one dollar of shareholder equity to fund its assets.

• ACI D/E Ratio (Aug. 2025): 4.73
• Industry Peer (Costco Wholesale Corp.) D/E: 0.34
• Industry Peer (Village Super Market Inc.) D/E: 0.69

Compared to industry peers like Costco Wholesale Corp. at 34.1%, Albertsons Companies, Inc. is significantly more leveraged. This high D/E ratio is a direct consequence of its history and its strategy of using debt to fund operations and shareholder returns, rather than relying on new equity issuance.

The company is actively managing this debt load. In November 2025, Albertsons Companies, Inc. issued $1.5 billion in new senior unsecured notes, including $700 million at 5.500% due 2031 and $800 million at 5.750% due 2034. This move was a debt-for-debt swap, primarily aimed at redeeming $750 million of its 3.250% senior notes due in 2026. This refinancing extends the maturity profile, which is smart, but it also locks in higher interest rates on the new notes, which is the cost of doing business in a rising-rate environment.

The credit market views this structure with caution. In October 2025, S&P Global Ratings assigned a 'BB+' issuer credit rating to Albertsons Companies, Inc., which is considered a non-investment grade or 'junk' rating. This rating reflects the company's substantial debt load, even though its assets, like its real estate portfolio, provide a significant recovery cushion for lenders in a distressed scenario. The company's capital allocation strategy clearly favors debt financing to maintain operational flexibility and fund shareholder initiatives, like the recently announced accelerated share repurchase program. For more detail on who is investing in ACI, check out Exploring Albertsons Companies, Inc. (ACI) Investor Profile: Who's Buying and Why?

Liquidity and Solvency

You're looking at Albertsons Companies, Inc. (ACI)'s balance sheet and seeing some numbers that might make you pause, and honestly, you should. The grocery retail model is built differently than, say, a tech company, so we need to translate the raw figures into real-world operational strength.

The direct takeaway is this: Albertsons Companies, Inc. (ACI) maintains a structurally tight liquidity position-common for a high-volume retailer-but their strong, predictable operating cash flow mitigates the near-term risk. Their efficiency is key.

Assessing Albertsons Companies, Inc. (ACI)'s Liquidity

When you look at the current ratio and quick ratio (acid-test ratio), the numbers are defintely low, which is a classic sign of a negative working capital strategy. For the trailing twelve months (TTM) of fiscal year 2025, Albertsons Companies, Inc. (ACI)'s current ratio is 0.81 and the quick ratio is 0.20. A current ratio below 1.0 means current liabilities exceed current assets, suggesting potential challenges in covering short-term debts if sales suddenly halt. But in grocery, inventory moves fast, and they are masters at managing accounts payable-that's where the cash is.

The quick ratio, which strips out inventory, is even lower at 0.20, which is normal for this industry. You're not worried about a grocery store liquidating its inventory (bananas and milk) to pay a bill; you're worried about whether they can keep the shelves stocked and the registers ringing. They can.

• Current Ratio: 0.81 (TTM FY2025)
• Quick Ratio: 0.20 (TTM FY2025)
• Cash and Equivalents: $270.6 million (as of Sept 6, 2025)

Working Capital and Cash Flow Trends

The real story of Albertsons Companies, Inc. (ACI)'s liquidity is in their working capital management. They operate with a significant negative working capital position, with the Net Current Asset Value around $-16.92 billion (TTM). This isn't a flaw; it's a deliberate strategy where they use supplier credit (accounts payable) to finance their inventory. They get paid by customers before they pay their vendors. Here's the quick math on efficiency: their cash conversion cycle-the time it takes to turn investment in inventory into cash-has been reportedly slashed to only one week, down from about two weeks previously. That's a huge operational win.

The cash flow statement confirms this operational strength. The company generated a robust $1,282.0 million in net cash from operating activities during the first 28 weeks of fiscal 2025. For the full fiscal year 2025, operating cash flow is estimated to be near $2.68 billion, which is the lifeblood of the company. Free cash flow (FCF) also improved by +19.29% to an estimated $749.4 million, which gives them flexibility.

Liquidity Concerns and Opportunities

The main liquidity concern is the structural dependence on accounts payable, which makes them sensitive to any sudden tightening of vendor terms. But the consistent OCF and the company's proactive financing moves are strong countermeasures. On the financing side, they recently announced a $750 million accelerated share repurchase program and are issuing US$1.25 billion in new senior unsecured notes in late 2025 to refinance existing debt, which pushes out maturity dates and helps manage interest expense. This is smart capital management, not desperation.

The opportunity here is that the strong cash generation supports shareholder returns, like the recent quarterly dividend of $0.15 per share. If you want to dig deeper into who is betting on this model, check out Exploring Albertsons Companies, Inc. (ACI) Investor Profile: Who's Buying and Why?

The cash flow is the safety net for the low ratios. Finance: keep tracking that cash conversion cycle weekly.

Valuation Analysis

You are looking at Albertsons Companies, Inc. (ACI) and asking the right question: is this stock a value play or a trap? Based on current multiples and analyst sentiment in November 2025, Albertsons Companies, Inc. (ACI) appears to be undervalued compared to the broader market, suggesting a compelling entry point for long-term investors.

The core of the argument lies in its low valuation multiples, which are heavily discounted due to the uncertainty following the failed merger with Kroger and the competitive grocery market. Here's the quick math on why the stock looks cheap right now.

Key Valuation Multiples (FY 2025)

When we look at the trailing twelve months (TTM) data ending in November 2025, Albertsons Companies, Inc. (ACI) trades at multiples that are far below the market average, pointing to a clear value proposition. The Price-to-Earnings (P/E) ratio is sitting at approximately 10.76, which is a significant discount when the S&P 500's average P/E is much higher. The forward P/E is even lower at about 8.11, reflecting anticipated earnings growth for the remainder of the fiscal year.

The Enterprise Value-to-EBITDA (EV/EBITDA) ratio is also attractive, hovering around 4.66 to 6.64 (TTM), which is low for a company with stable cash flows. This ratio is critical for a capital-intensive retailer because it accounts for the company's substantial debt load. For reference, the TTM EBITDA used in this calculation is approximately $3.835 billion, aligning with the company's fiscal 2025 adjusted EBITDA guidance of $3.8 billion to $3.9 billion.

The Price-to-Book (P/B) ratio is around 3.27. To be fair, this is higher than some peers, but it's often less relevant for a mature, asset-heavy retailer that generates most of its value from inventory turnover and real estate, not just book value.

• Low P/E signals undervalued earnings.
• Low EV/EBITDA suggests a cheap operating business.

Stock Performance and Dividend Stability

The stock price trend over the last 12 months has been disappointing, with the share price sliding about 7.1% to 8.50% as of November 2025, while the broader market saw gains. This lag is largely due to the regulatory uncertainty that surrounded the proposed merger with Kroger. The 52-week trading range of $16.70 to $23.20 shows the stock is currently trading near its low end, with a recent closing price around $18.21.

Still, the dividend profile is solid. Albertsons Companies, Inc. (ACI) pays an annual dividend of $0.60 per share, giving it a yield of roughly 3.38%. The dividend payout ratio is a sustainable 33.7% to 35.5% of earnings, meaning they defintely have room to cover the payment and reinvest in the business. This strong, covered dividend provides a floor for the stock price and a steady income stream while you wait for the valuation to correct.

Analyst Consensus and Price Target

Wall Street's consensus on Albertsons Companies, Inc. (ACI) is a Moderate Buy. This rating reflects the low valuation and the company's solid operational performance, especially the 2.2% identical sales growth in Q2 fiscal 2025. The average 12-month price target from analysts is approximately $23.43. Here's the quick math: with the stock trading near $18.21, that consensus target implies a potential upside of over 28%. This is a significant margin of safety.

The company's focus on its digital platform-with a 23% surge in digital sales in Q2 FY2025-and its private-label brands are key growth drivers that analysts are banking on. For a deeper dive into the company's long-term strategic direction, you can review the Mission Statement, Vision, & Core Values of Albertsons Companies, Inc. (ACI).

Next Step: Portfolio Manager: Model a scenario where Albertsons Companies, Inc. (ACI) P/E ratio expands to 12.0x (still below the market) and calculate the implied share price by Friday.

Risk Factors

You're looking at Albertsons Companies, Inc. (ACI) and seeing a defensive stock with strong digital growth, but honestly, the near-term risks are substantial and complex. The biggest issue isn't just the intense grocery competition; it's the lingering regulatory fallout from the terminated merger and a persistent squeeze on profitability. We need to map these risks to see if the current valuation discount is worth the headache.

The company's full-year 2025 guidance for Adjusted EBITDA is solid, projected between $3.8 billion and $3.9 billion, but that stability is being challenged by three main risk pillars: strategic uncertainty, margin erosion, and financial leverage. You defintely need to keep a close eye on the first two.

Regulatory and Strategic Uncertainty

The biggest external risk right now is the legal and regulatory uncertainty following the termination of the planned merger with Kroger. This event has left a cloud over management's strategic focus. Albertsons Companies, Inc. is still dealing with ongoing litigation and the possibility of not collecting the anticipated $600 million termination fee from Kroger, which would be a material hit to cash flow and investor sentiment.

Plus, the company is now forced to execute a standalone strategy, which requires substantial capital expenditures-forecasted between $1.8 billion and $1.9 billion for fiscal 2025-to modernize stores and upgrade its digital platform.

Operational and Margin Pressure

The grocery business is a brutal battleground against giants like Walmart, Kroger, and Amazon's Whole Foods. This pressure is hitting Albertsons Companies, Inc.'s bottom line directly. Their operating margin sits around a thin 2.0%, which is miles below the market average.

This margin vulnerability is driven by two key internal factors: labor and digital costs. The company's net profit margin has slipped to roughly 1.2%, a direct result of rising labor costs and the expense of fulfilling digital orders. Labor contract negotiations involving approximately 120,000 associates are ongoing, and any significant wage increase will keep Selling, General, and Administrative (SG&A) expenses elevated. The 23% surge in digital sales in Q2 2025, while great for growth, comes with higher delivery and handling costs that compress the gross margin rate. It's a constant trade-off between growth and profitability.

Financial Leverage and Market Conditions

Albertsons Companies, Inc. operates with a moderately leveraged balance sheet, which increases its financial risk in a higher interest rate environment. The company's debt-to-equity ratio is high at 4.44, indicating a significant reliance on debt financing. Total debt is substantial, sitting around $14.18 billion. While they are generating positive cash flow from operations, this level of debt limits financial flexibility for large, unbudgeted investments or acquisitions.

External macroeconomic conditions are also a risk. Changes in food price inflation or deflation, plus shifts in consumer spending patterns-especially if federal assistance programs change-can quickly impact identical-store sales, which are already only projected to grow between 2.2% and 2.75% for the full year. You can learn more about the overall financial picture in our full analysis: Breaking Down Albertsons Companies, Inc. (ACI) Financial Health: Key Insights for Investors.

Here's a quick snapshot of the core risks and the company's counter-moves:

The company's primary mitigation strategy is to push its 'Customers for Life' plan, investing in digital and pharmacy operations, which showed strong growth in Q2 2025. Still, the market will need to see consistent margin improvement to fully price in the value of their growing digital business.

Next Step: Portfolio Manager: Model ACI's valuation with and without the $600 million termination fee by the end of the week.

Growth Opportunities

You're looking at Albertsons Companies, Inc. (ACI) and trying to figure out where the real growth is coming from, especially now that the Kroger merger is off the table. Honestly, the company is doubling down on its own strengths, and the numbers from the fiscal year 2025 outlook show a clear path: digital engagement and operational efficiency are the engines.

The company recently raised its full-year guidance, which is a strong signal of confidence. They now project identical sales growth (sales from stores open for at least a year) to be in the range of 2.2% to 2.75% for fiscal 2025. That's a modest but steady climb in a tough grocery environment. For investors, the key is the updated Adjusted Net Income Per Share (EPS) outlook, which is now expected to land between $2.06 and $2.19. This improvement is not just luck; it's driven by specific, actionable strategies.

Here are the key growth drivers moving the needle:

• Digital and Pharmacy Expansion: Digital sales surged by 23% in the second quarter of fiscal 2025. Plus, the pharmacy business-especially with the integration of Rite Aid's network-is a significant growth area, driving a lot of the identical sales increase.
• Albertsons Media Collective (AMC): This is a high-margin opportunity. The in-house retail media platform leverages Albertsons' rich customer data to generate incremental digital advertising revenue, diversifying income beyond just selling groceries. It's a smart way to monetize their extensive store footprint and 48.7 million loyalty members.
• Productivity and Cost Savings: Albertsons is executing a massive productivity agenda to offset inflation. They are targeting a substantial $1.5 billion in cost reductions over the fiscal years 2025 through 2027, focusing on supply chain optimization and technology upgrades. That's a serious commitment to margin improvement.

The company is also modernizing its footprint, which is smart. They plan to close 29 underperforming stores while opening 9 new ones by year-end, optimizing their physical presence. They're not just cutting costs, they're investing with purpose. They're also returning value to shareholders, announcing a $750 million accelerated share repurchase (ASR) in Q2 2025.

Their competitive advantages are clear, and they position the company well for sustained growth, even against giants like Walmart. Their Own Brands portfolio (private label) is a powerhouse, generating $16.4 billion in sales in fiscal 2024. These brands, like O Organics and Lucerne, offer better margins and build fierce customer loyalty. This is their moat. The focus on an omnichannel retail strategy-seamlessly blending in-store and digital-is defintely critical for keeping customers for life.

Here's a quick look at the core financial projections for fiscal year 2025, based on the latest guidance:

What this estimate hides is the continued pressure on gross margins from inflation and the mix shift toward lower-margin pharmacy sales, but the productivity engine is designed to counteract that. For a deeper dive into the company's full financial health, you should read Breaking Down Albertsons Companies, Inc. (ACI) Financial Health: Key Insights for Investors.