Albertsons Faces Pressure From Value-Conscious Consumers as CEO Morris Moves to Reshape Business

First-quarter results show declining identical sales, lower profits and margin pressure, while Susan Morris launches ACI Edge restructuring and executives buy shares following the earnings selloff

Albertsons Companies (NYSE:ACI) is moving into the second half of fiscal 2026 under increasing pressure from value-conscious consumers, softer grocery industry unit trends and rising costs, as new CEO Susan Morris moves to reshape the company’s operating structure and improve its competitive position.

The Boise, Idaho-based supermarket operator reported first-quarter fiscal 2026 net sales and other revenue of $24.94 billion for the 16 weeks ended June 20, up 0.2% from $24.88 billion in the year-ago period. The increase, however, was driven by higher fuel sales, while identical sales declined 0.8%.

The quarter also produced a significant decline in profitability. Albertsons reported net income of $84.7 million, or 17 cents per share, compared with $236.4 million, or 41 cents per share, in the first quarter of fiscal 2025. Adjusted net income fell to $210.3 million, or 42 cents per share, from $318.9 million, or 55 cents per share, a year earlier. Adjusted EBITDA declined to $1.013 billion from $1.111 billion, with the margin falling from 4.5% to 4.1%.

The results underscored the challenge facing Morris, who became Albertsons’ president and CEO in May 2025 after previously serving as the company’s chief operating officer.

In announcing the results, Morris acknowledged that the company is facing a more difficult environment. “In the first quarter, our digital and pharmacy businesses continued to deliver strong growth, while core grocery faced increasing pressure from softer industry unit trends and a more cautious consumer.”

She added that while the results “did not meet our expectations,” they demonstrated the need for Albertsons to accelerate its response. “Through ACI Edge, we are accelerating change to strengthen our competitiveness and improve execution across the business.”

Albertsons’ Core Grocery Business Is Under Pressure

The most significant concern in the quarter was not revenue growth itself, but what was happening underneath the top line. 

Albertsons said the decline in identical sales was most pronounced among lower-income consumers, where the company continued to see softness in both units and basket size. Management also pointed to broader weakness in grocery industry unit trends and increasing pressure on consumers.

That pressure is occurring as Albertsons competes against Amazon, Walmart, Aldi and other retailers that have increasingly emphasized low prices and value. Morris had already highlighted the issue following the company’s fiscal 2025 results in April, saying the company was seeing “increasing pressure on the lower-income cohorts” and that customers were focused on value.

The pressure became more apparent in the first quarter.

Although identical sales declined 0.8%, management indicated that the underlying performance was better after accounting for approximately 100 basis points of pressure from the Inflation Reduction Act’s changes to Medicare drug pricing and another 50 basis points associated with egg deflation. Excluding those factors, identical sales would have increased approximately 0.7%, according to management’s earnings discussion.

That distinction is important because it suggests Albertsons is not facing a broad-based collapse in customer demand. Instead, the company is dealing with a combination of consumer weakness, industry unit declines, pharmacy-related headwinds and the need to spend more aggressively to maintain its value proposition.

Digital and Pharmacy Continue to Perform

There were bright spots in the quarter. Digital sales increased 13%, while pharmacy remained another area of strength despite the headwinds associated with the Inflation Reduction Act.

Digital growth, however, is also contributing to pressure on margins. Albertsons’ gross margin rate declined to 26.6% from 27.1% a year earlier. Excluding fuel and LIFO, the gross margin rate declined 23 basis points.

The company said the decline was primarily attributable to higher delivery and handling costs associated with continued digital growth, as well as higher fuel costs. Those pressures were partially offset by improved pharmacy margins.

The company is nevertheless seeing progress in its digital economics. E-commerce became profitable on a combined basis for the first time during the quarter, according to management. That represents an important development for Albertsons as it attempts to build a more integrated physical and digital grocery business.

ACI Edge Will Restructure Albertsons

Perhaps the most consequential announcement surrounding the quarter was the launch of ACI Edge, a new operating structure designed to simplify Albertsons’ organization and make the company faster and more accountable.

Under the plan, Albertsons is consolidating its 11 divisions into four regions – California, West, South and East – while fully centralizing center-store merchandising under a single enterprise team.

The company said the new structure will allow it to leverage its scale more effectively while giving regional leadership greater responsibility for local execution. Center-store merchandising, meanwhile, will be centralized to bring category management, supplier relationships and merchandising strategy together across the organization.

The goal is to strengthen supplier relationships, create greater consistency among banners and regions and improve Albertsons’ ability to leverage its scale.

The restructuring is expected to generate approximately $200 million in incremental annual run-rate benefits, with savings building through fiscal 2026 and the majority expected to be realized in fiscal 2027. Albertsons expects approximately $50 million in transition costs over the two-year period.

For Morris, the restructuring is less about simply cutting expenses than changing how Albertsons operates.

The company has described the strategy as an effort to combine enterprise scale with greater regional accountability – using centralized capabilities where scale matters while giving regional teams more authority over areas such as fresh, service, store standards, local merchandising and community connections.

Albertsons Cuts Full-Year Guidance

Investors, however, are being asked to wait for the benefits of ACI Edge while dealing with weaker results in the near term. Albertsons reduced its fiscal 2026 outlook following the first-quarter results.

The company now expects identical sales to decline between 0.5% and 1.5%, compared with its previous expectation for growth of 0% to 1%. Adjusted EBITDA is now projected at $3.55 billion to $3.625 billion, down substantially from the previous range of $3.85 billion to $3.925 billion.

Adjusted earnings are expected to be $1.75 to $1.85 per share, compared with the previous guidance of $2.22 to $2.32. Capital expenditures are now expected to total $1.9 billion to $2.0 billion, down from the previous $2.0 billion to $2.2 billion forecast.

The reduced guidance reflects more than the first-quarter results. Management said it is taking a more cautious view because of continued pressure on lower-income consumers, softer grocery industry unit trends and the potential for additional affordability pressure from supplier cost increases.

Higher transportation and supply costs are another concern, particularly as fuel prices have risen. Management has indicated that Albertsons intends to work with suppliers to absorb some of those increases rather than simply pass the costs through to consumers, even if doing so means accepting some margin compression.

That creates a difficult balancing act: Albertsons needs to invest in price and value to remain competitive while simultaneously protecting profitability.

Morris and Other Executives Buy Albertsons Stock

The market’s reaction to the quarter was severe. Albertsons shares fell to a record low of $11.03, following the earnings report and reduced outlook. The stock remained near the bottom of its 52-week range in the days that followed.

Interestingly, Albertsons’ senior executives made a notable show of confidence in the company. Morris made her first open-market purchase of Albertsons shares since becoming CEO, buying a total of 39,409 shares on July 28.

Her purchases consisted of 20,277 shares at $11.46 each and another 19,132 shares at $11.38, according to regulatory filings. The purchases brought her total holdings to nearly 1.1 million shares, worth approximately $13.2 million based on the stock’s $12.08 closing price on August 6. Morris was not alone.

Thomas Moriarty, Albertsons’ executive vice president of mergers, acquisitions and corporate affairs, purchased 170,500 shares at $11.51 per share on July 27. CFO Sharon McCollam, who has announced plans to retire, purchased 9,000 shares at $11.48 per share on July 31.

The purchases are relatively small compared with these executives current holdings, but they represent a notable vote of confidence from senior management following the company’s earnings-driven selloff.

Albertsons Continues to Invest Despite the Pressure

Albertsons is not responding to its challenges solely through restructuring. The company spent $522.1 million on capital expenditures during the first quarter, including 15 store remodels, four new store openings and continued investments in digital and technology platforms.

It also continues to return capital to shareholders.

The company increased its quarterly dividend by 13% earlier this year, from 15 cents to 17 cents per share, and repurchased 13.4 million shares for $226.5 million during the first quarter. The board had increased the company’s total remaining share repurchase authorization to $2 billion.

That combination – investing in stores and technology, increasing customer-value spending, restructuring the organization and continuing share repurchases – illustrates the competing priorities facing Morris. Albertsons needs to improve its price and customer proposition without allowing profitability to deteriorate further.

The company expects the restructuring to generate approximately $200 million in annual benefits, but most of those savings are not expected until fiscal 2027. In the meantime, Albertsons has lowered its expectations for sales, EBITDA and earnings while signaling that it is willing to spend more – and potentially accept lower margins – to remain competitive on price.

The company’s first-quarter results show a grocery retailer with significant strengths – including a nearly $25 billion quarterly revenue base, growing digital sales, a strong pharmacy business, continued capital investment and substantial cash generation – but also a core supermarket business facing a more demanding consumer and increasingly aggressive competition for value shoppers.

Morris Is Under Pressure to Perform

Morris enters this period of stress with extensive experience inside Albertsons. She previously served as chief operating officer from 2018 until becoming CEO in 2025, giving her deep familiarity with the company’s stores, operations and regional structure. That background could prove important as ACI Edge is implemented.

The challenge is that the changes are being made at a time when Albertsons cannot afford to wait for an economic recovery to solve its problems… And the competition is fierce amongst traditional grocery retailers. Additionally, rumors have recently swirled that large stakeholders are interested in exploring other Chief Executive Officers. 

That remains to be seen as little more than speculation, but what we do know is that the company – and Morris –  are under immense pressure to perform. Any hope of settlement funds from the Kroger merger breakup must be secondary to a real plan to change the direction of the firm. 

ACI Edge is therefore more than an organizational change. It represents Morris’ first major attempt as CEO to change the trajectory of Albertsons. 

The next few quarters will provide the more meaningful test: whether Albertsons can translate its scale, digital growth, pharmacy strength and new operating structure into stronger grocery sales and improved margins while consumers continue to prioritize value.