The companies on the Global 500 employ 70.2 million people, and their revenue represents more than one-third of the world’s GDP.

Fortune Global 500

With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

This ranking evaluates how Fortune 500 companies are deploying AI, and how technology leaders value those investments relative to industry peers.

Fortune AIQ 50

The corporations on our annual list of the world's 500 largest companies combined to generate $41.7 trillion in revenue over the past year.

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

The corporations on our annual list posted aggregate revenues of $41 trillion for the second year in a row.

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The corporations on our annual list of the world’s largest companies delivered a record $41 trillion in aggregate revenues.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

F500-2023-053-Albertsons

The Boise-based grocery giant, which owns Albertsons, Safeway, and Vons, fell one spot on this year’s list. 
<ul> 
 	<li>For the 2022 fiscal year, Albertsons earned $71.9 billion in revenue and net income of $1.6 billion.</li> 
 	<li>In October 2022 rival Kroger announced that it would buy Albertsons in a deal that values the company at more than $20 billion. Politicians and labor unions have pushed back against the proposed acquisition, arguing it will eliminate jobs, reduce wages, and raise food prices.</li> 
 	<li>The companies have said regulatory approval of the deal won’t happen until early 2024 and will likely require the sale or spinoff of hundreds of stores.</li> 
 	<li>A combined Kroger-Albertsons would earn $200 billion in revenue and operate 5,000 stores.</li> 
</ul>

Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

This year’s Fortune 500 marks the 68th running of the list.

F500 2022-Albertsons

The Idaho-based Albertsons grocery empire encompasses more than a quarter of a million employees and over 2,250 stores. The company owns popular grocery store chains such as Acme and Safeway, giving it the heft to compete with Fortune 500 mainstays Walmart and Kroger. In 2021, Albertsons named Sharon McCollam, a former Best Buy and Williams-Sonoma executive, as the company’s president and chief financial officer. Revenue and profits both rose sharply in its most recent fiscal year, as consumers continued to prioritize home cooking during the ongoing pandemic.

Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

G500 133 Albertsons

The grocer, based in Boise, Idaho, has more than 2,250 stores and more than 250,000 employees, making it the second-largest supermarket chain in North America, after Kroger. Albertsons rose three spots in the Fortune 500 over the past year, partially buoyed by COVID-19-fueled buying, as more consumers cooked and ate at home rather than at restaurants during the pandemic.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-52-Albertsons

This year's Fortune Global 500 generated $33.3 trillion in revenues and $2.1 trillion in profits.

G500-2020-174-Albertsons

Based in Boise, Idaho, Albertsons is the second-largest supermarket chain in North America after Kroger, with more than 2,200 stores and some 270,000 employees. The latter number has grown in recent months as the company has staffed up to meet the COVID-19-related spike in demand, hiring about 55,000 people since March. Albertsons had a strong spring as consumers turned to home cooking in the face of the pandemic; sales were up 34% on an annual basis in March and April. The company went public in June amid a tumultuous market, but so far investors seem satisfied with the grocer's performance, with the stock now hovering close to the IPO price of $16.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-055-Albertons

The privately held grocer, based in Boise, Idaho, has 2,200 stores and more than 250,000 employees, making it the second-largest supermarket chain in North America after Kroger. Earlier this year, Albertsons filed for an IPO, and despite the economic turmoil, it remains committed to going public. The timing certainly seems good: Profits almost tripled in its most recent fiscal year, reaching $466 million in the 53 weeks ending Feb. 29, up 256% year-over-year. Partially buoyed by COVID-19-fueled buying, March and April sales rose by 34% on an annual basis, and the company has hired 55,000 people since March.

This year's Fortune Global 500 generated $27.7 trillion in revenues and $1.5 trillion in profits.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

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Albertsons, through its subsidiaries, operates food and drug stores in the United States. The company’s food and drug retail stores offer grocery products, general merchandise, health and beauty care products, pharmacy products, fuel, and other items and services. It operates stores under various brand names, including Albertsons, Safeway, Vons, Pavilions, Randalls, Tom Thumb, Carrs, Jewel-Osco, Acme, Shaw’s, Star Market, United Supermarkets, Market Street, Haggen, Kings Food Markets, and Balducci’s Food Lovers Market. In October 2022 Albertsons announced intentions to merge with Kroger in a $24.6 billion deal, but various unions and lawmakers mounted anticompetitive objections and the deal was ultimately blocked. Albertsons traces its roots back to 1860, the founding date of its Shaw’s brand; Albertsons currently operates as a subsidiary of Albertsons Investor Holdings LLC.

Q1 2027

Q4 2026

Q3 2025

Q1 2025

Q4 2025

Q3 2024

Albertsons (ACI): Company Profile, Stock Price, News, Rankings

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Albertsons

albertsons

Welcome to the Albertsons Companies' third quarter 2025 earnings conference call, and thank you for standing by. All participants will be in a listen-only mode until the Q&A session. This call is being recorded. I would now like to hand the call over to Cody Perdue, Senior Vice President of Treasury, Investor Relations and Risk Management. Please go ahead.

Good morning, and thank you for joining us for the Albertsons Companies' third quarter 2025 earnings conference call. With me today are Susan Morris, our CEO, and Sharon McCollam, our President and CFO. Today, Susan will provide an overview of our third quarter of 2025 and update you on our progress against our strategic priorities. Then, Sharon will provide the details related to our third quarter financial results and our outlook for the remainder of fiscal 2025 before handing it back to Susan for closing remarks. After management comments, we will conduct a Q&A session. I would like to remind you that management may make forward-looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.

These risks and uncertainties include, but are not limited to, the factors identified in our filings with the SEC. Any forward-looking statements we make today are only as of today's date, and we undertake no obligation to update or revise any such statements as a result of new information, future events, or otherwise. Additionally, we will be discussing certain non-GAAP financial measures. A reconciliation of these financial measures to the most directly comparable GAAP financial measures can be found in this morning's earnings release. And with that, I will hand the call over to Susan.

Thanks, Cody. Good morning, everyone, and happy New Year. This quarter marked the first since we declared a new day at Albertsons, and we delivered. We drove bold decisions in our tech and AI transformation, purposeful investments to strengthen our customer value proposition, and accelerated execution in digital and pharmacy. In the face of a government shutdown, SNAP delays, and a challenging consumer backdrop, our team executed with discipline and urgency. Identical sales grew 2.4%, digital sales rose 21%, and adjusted EBITDA was $1.039 billion. These results underscore the resilience of our model, anchored by more than 2,240 neighborhood stores. Our proximity, deep, fresh expertise, and trusted portfolio of brands give us a clear advantage in serving more than 49 million loyal customers and advancing our Customers for Life strategy. We're building a structurally advantaged Albertsons, one that wins in any environment.

And yet, our current valuation does not reflect the progress that we've made or the long-term earnings power we're creating. This disconnect only sharpens our resolve to execute faster, scalar transformation and deliver the performance that ultimately commands the value this company deserves. Our mission is clear: growing customers for life by leveraging our strengths, sharpening our competitive edge, and delivering consistent value for customers, all while driving sustainable long-term value for our shareholders. During the quarter, execution was strong, and we delivered meaningful efficiencies through intentional and methodical cost control. Importantly, year-over-year unit trends improved sequentially versus the second quarter, reflecting the impact of our surgical price investments and reinforcing the effectiveness of our broader strategy. I'm extremely proud of how our team is executing.

Also, during the quarter, we continue to advance our strategic priorities with intent and conviction to position us for profitable growth as we enter 2026. These priorities include modernizing capabilities through technology, scaling digital engagement, and monetizing our Media Collective, enhancing our customer value proposition, and unlocking structural productivity gains. As we look forward, one of the most exciting drivers of our transformation and a key source of long-term competitive advantage is technology. Our advanced cloud data infrastructure provides the foundation for scaling AI solutions and business processes across the enterprise. Additionally, we're enhancing our agility and speed to market with our global capability center in Bengaluru. We're not just adopting AI. We're working to scale it across the enterprise to fundamentally change how we operate and how customers experience Albertsons. This is not incremental. It's designed to be step change in speed, intelligence, and personalization.

Our teams are energized, and our foundation is strong, and our strategic priorities are clear. With bold decisions and partnering with world-class leaders like Google, OpenAI, and Databricks, we're building a future where every decision is smarter, every process is more efficient, and every interaction is more seamless. So where are we focused first? Our transformational big bets are in four critical areas. First, in digital customer experience. Digital customer experience is a critical pillar of our growth strategy. By leveraging AI, we're creating differentiated experiences that go beyond convenience. They increase basket size, drive repeat trips, and deepen loyalty. Early results are compelling. Our Ask AI search capability is already delivering a 10% increase in basket size for those customers using it, signaling a meaningful revenue upside as adoption scales.

In addition, our autonomous shopping assistance is meeting customers where they are and delivering frictionless, personalized journeys, keeping our omnichannel customer experience modernized and on trend. Next, in Merchandising Intelligence, we'll be equipping our merchants with AI-driven insights and automated execution to optimize pricing, promotions, and assortment decisions, transforming category management and driving margin improvement. Our vision is a future where intelligent automation guides these decisions, freeing our people to focus on strategy and innovation. Our ambition is for customers to truly feel seen, to reliably find the essentials they need at prices they trust, while also discovering unique, inspiring items that make our stores a destination and eliminate the need for a trip elsewhere. Next, in empowering and managing labor, we're deploying generative AI to optimize labor forecasting and scheduling across our retail labor model, reducing costs while improving associate experience through intuitive conversational tools.

By leveraging AI, we ensure the right associates are in the right place at the right time, which not only drives productivity but also elevates customer service. This transformation simplifies complex scheduling tasks, frees up associates to focus on the customer, and positions us to deliver consistent execution across thousands of stores. Finally, optimizing our end-to-end supply chain. AI demand forecasting is central to our supply chain transformation, enabling precise product tracking from vendor to customer. By applying advanced analytics and computer vision, we're improving forecasting accuracy, fulfillment quality, and on-shelf availability, optimizing labor and inventory while ensuring that customers can find the products they need when and where they need them. In sum, our tech and AI initiatives are designed to be scalable enterprise-wide programs that can deliver measurable impact and build the foundation for tomorrow.

By embedding this across our business, we will unlock structural cost advantages, accelerate speed to market, and create new profit pools. We're turning technology into a growth engine, improving margins, deepening customer loyalty, and positioning us to win. With momentum accelerating and a clear roadmap, we're confident that this transformation will help drive sustainable value for customers and long-term returns for shareholders. Turning to our digital and e-commerce business, we continue to gain market share with sales up 21% this quarter and penetration now at 9.5%. As we've consistently said about our e-commerce business, the resilience, scalability, and customer proximity of our store-based fulfillment model remains a structural advantage in last-mile fulfillment and positions us well for profitable growth. In fact, during Q3, more than half of our orders were delivered in three hours or less, underscoring the speed and convenience that differentiate our offering.

In addition, more than 95% of our delivery households are eligible to receive our Flash Delivery in as soon as 30 minutes. We're also adding features to our platform like the AI shopping assistant I just mentioned, a groundbreaking tool that redefines the shopping experience. This AI-powered assistant enables customers to interact in natural language, receive personalized recommendations, and build smarter baskets faster, whether they're planning meals, discovering new products, or shopping for specific occasions. This innovation enhances convenience for our customers while strengthening our competitive advantage by leveraging rich data to optimize marketing, improve loyalty, and unlock new monetization opportunities through our Media Collective. Our pharmacy and health business delivered another outstanding quarter. Growth was driven by strong execution in our immunization offering, GLP-1 therapies, and core prescriptions. We captured leading share in immunizations and strengthened long-term customer relationships.

These efforts reinforce our position as a trusted health partner and deepen engagement across channels. Customers who engage across both grocery and pharmacy continue to demonstrate significantly higher lifetime value, underscoring the strength of our customers-for-life strategy. Based on the strength of this performance, we remain on track to deliver profitable growth in our pharmacy business in 2025, supported by disciplined execution and efficiency initiatives. Scaling higher margin services, expanding central fill capabilities, driving innovative procurement, and leveraging operational efficiencies continue to be key priorities as we position this business for sustained growth into 2026 and beyond. In loyalty, we continue to drive digital engagement and value creation, with membership growing 12% to over 49 million members in the third quarter. Program enhancements and simplification continue to fuel deeper engagement. Members are transacting more frequently, redeeming rewards more easily, and spending more.

40% of engaged households continue to choose the cash-off option, underscoring the appeal of immediate value for our most engaged and loyal customers. Loyalty also serves as a rich data source for our merchants and for our Media Collective, enabling targeted marketing and monetization. Most recently, we again extended the value of our loyalty platform beyond grocery with the launch of a new offering with Uber One, offering members exclusive benefits and savings, further strengthening engagement and broadening the appeal of our platform. Our Media Collective continues to gain traction as a high-margin growth engine. In Q3, on-site media delivered double-digit growth year-over-year. We also strengthened performance by adding transaction capability to off-site ad units. These improvements drove higher ROI for our partners, faster campaign activation, positioning us to capture incremental spend.

While the retail media space remains highly competitive, our advantage lies in the depth of our loyalty data and omnichannel reach, which enable targeted, measurable campaigns that improve both partner outcomes and the customer experience. Looking ahead, we're focused on scaling these capabilities and unlocking new monetization opportunities, creating a structural profit pool that complements our core retail business. Few companies possess the depth of store-level, customer-level, and category-level data that we do, and we're increasingly using that data to deliver a more relevant, localized, and differentiated customer experience. From a customer value perspective, we continue to invest in value through loyalty enhancements, personalized promotions, and selective price investments in key categories. And these actions, combined with vendor funding and Own Brands innovation, are strengthening engagement and driving unit growth. In our Own Brands portfolio, we have a clear path to growing penetration from 25%-30%.

In the divisions where we've launched our new lower price campaign, we continue to see fundamentally better unit trends and growth in unit share, reflecting the impact of our targeted strategies. We also very carefully manage the pass-through inflation to deliver value for customers across the entire company, ensuring affordability while protecting margins. Importantly, unit trends for the quarter improved sequentially, even with the government shutdown, again underscoring the resilience of our approach. Productivity remains a cornerstone of our transformation and a critical enabler of our investments. Our teams are executing with discipline across multiple fronts, optimizing our labor model, redesigning ways of working, including a targeted global diversification of talent to drive efficiency at scale. We're also unlocking structural savings through automation, advanced analytics, and process simplification across merchandising, supply chain, and store operations.

In pharmacy, where growth continues to accelerate, we're streamlining fulfillment and procurement to improve cost-to-serve while also enhancing the customer experience. These efforts are not isolated. They're part of our comprehensive plan to deliver $1.5 billion in productivity gains over the next three fiscal years, creating capacity to fund innovation, strengthen our value proposition, and improve profitability. Already in 2025, we're seeing the benefits of our productivity reduce SG&A spend as we accelerate our efforts around labor optimization. By attacking waste, modernizing labor planning, and embedding technology into core processes, we're building a leaner, more agile organization that's positioned to win. Finally, before I hand it over to Sharon to cover the financial details of the quarter and our outlook for the remainder of the year, I want to spend a minute on the consumer backdrop and what we continue to see from our customers.

Consistent with what you've heard from others, the environment remains mixed and continues to reflect pressure across income segments. At the low end, shoppers are clearly stretched, putting fewer items in the basket each trip and prioritizing essentials while visiting more frequently as they manage their cash flow. Middle-income households, which have been relatively resilient, are showing some signs of softening, with increased price sensitivity and trade-down behavior emerging in certain categories. At the high end, spending patterns remain largely stable, but even these customers are becoming more conscious of price and value, reflecting a broader shift towards cautious discretionary spending. Looking ahead, our outlook and actions are fully aligned with these dynamics. We're leaning into personalized promotions, loyalty enhancements, and the surgical management of cost inflation to deliver immediate value while continuing selective price investments in key categories to support unit growth.

At the same time, we're leveraging technology and AI, just as we discussed, to deepen engagement and optimize the shopping experience, ensuring that our strategy not only addresses current consumer behavior but also positions us to capture, share, and drive profitable growth as behaviors evolve. Sharon, over to you.

Thank you, Susan, and good morning, everyone. It's great to be here with you today. Building on Susan's comments, Q3 did mark a new day for our Albertsons teams. Disciplined execution and purposeful investments drove a 2.4% identical sales increase and a 21% increase in digital sales. While temporary headwinds from the government shutdown and delayed SNAP funding negatively impacted ID sales by approximately 10-20 basis points, we sequentially strengthened our year-over-year unit trends, clear evidence that our targeted price investments are working and reinforcing the resilience of our model.

In pharmacy and health, sales increased 18% as we delivered another strong quarter and deepened engagement through immunization and value-added services. Loyalty membership grew to 49.8 million, reinforcing the strength of our customers-for-life strategy. At the same time, as Susan shared, we continued scaling the Media Collective and advancing our technology transformation, including embedding AI across the enterprise and modernizing capabilities to drive productivity and growth. Each of these initiatives contributed to the results we just delivered for the third quarter, which I will discuss now. From a top-line perspective, ID sales grew 2.4%, which is net of the 10-20 basis points government shutdown headwind, and we saw encouraging growth in areas where we made price investments.

Gross margin came in at 27.4%, a decline of 55 basis points year-over-year, excluding fuel and LIFO, reflecting the expected mixed-shift impact of digital and pharmacy and our targeted price investments. Importantly, year-over-year gross margin improved sequentially versus Q2, as productivity benefits partially offset targeted investments, demonstrating that our actions are delivering results even as we prioritize value for customers. Our selling and administrative expense rate was 24.9%, down 33 basis points year-over-year, excluding fuel, another clear proof point of disciplined cost management. This improvement reflects ongoing productivity initiatives and operating leverage, which we are using to fuel our investments to drive growth. Interest expense increased $7 million-$116 million this quarter, primarily due to borrowings related to our $750 million accelerated share repurchase program announced last quarter.

Adjusted EBITDA in Q3 was $1.039 billion, and adjusted EPS was $0.72 per diluted share, in line with our expectations and reflective of the strategic investments we're making in long-term growth. Turning to capital allocation, our priorities remain clear: invest in the business to drive growth and value for our customers, maintain and grow our dividend over time, opportunistically repurchase shares, and preserve a strong balance sheet that gives us flexibility to accelerate investment when opportunities arise. In Q3, we invested $462 million in capital expenditures to upgrade our store fleet and advance digital technology and supply chain capabilities. In our store fleet, we opened two new stores, completed 23 remodels, and closed 16 underperforming locations, all actions that strengthen our asset base for long-term competitiveness.

From a digital and technology perspective, we further invested in AI and digital transformation to create structural cost advantages, deepen customer loyalty, and unlock new profit pools, further modernizing the company for sustainable, profitable growth in an evolving retail landscape. We also returned $77 million to shareholders through our quarterly dividend of $0.15 per share and continued our $750 million accelerated share repurchase program, which began last quarter and is expected to be complete in early 2026. The benefits of this ASR will accrue to EPS as we move through fiscal 2026. There is also $1.3 billion remaining under our existing $2.75 billion authorization that can be executed at the completion of the ASR. Our net debt-to-Adjusted EBITDA ratio ended the quarter at 2.29x, underscoring the strength of our balance sheet and capacity to fund growth while returning capital to shareholders.

Finally, in the third quarter, we also refinanced $1.5 billion of existing indebtedness in two tranches: $700 million of 5.5% notes due 2031 and $800 million of 5.75% notes due 2034. These proceeds were used to refinance our $750 million 2026 bond maturity and repay $750 million in borrowings under our revolving credit facility, demonstrating the strength and flexibility of our balance sheet. Before we turn to the outlook, I'd like to give you a quick update on our year-to-date labor negotiations. As a reminder, in fiscal 2025, we had collective bargaining agreements covering 120,000 associates up for renewal. As of today, we've successfully reached agreements covering more than 112,000 of these associates, leaving only 8,000 left to bargain this year. Now let's walk through our 2025 outlook. Our focus remains squarely on investing in and driving long-term profitable growth through our strategic priorities.

Digital remains a powerful growth engine as we continue to add loyal shoppers to our ecosystem and scale the business profitably. Disciplined cost control and productivity also remains a key focus of our strategy, fueling reinvestment into these high-impact initiatives while maintaining financial strength. At the same time, we expect our pharmacy business to continue to accelerate, driven by immunizations and value-added services that enhance customer engagement and profitability. In pharmacy, however, on January 1st, 2026, the Inflation Reduction Act's Medicare Drug Price Negotiation Program took effect, reducing consumer prices and supplier costs on certain branded drugs. While this will result in lower reported pharmacy sales, the impact to profit is near neutral.

In the fourth quarter, we estimate and have included in our outlook an approximate 65-70 basis point headwind to identical sales, which will equate to a 16-18 basis point impact for the full year, with no impact to adjusted EBITDA. With that as the backdrop, we're updating our fiscal 2025 outlook as follows. For identical sales, we are narrowing our range to reflect the impact of the Inflation Reduction Act to 2.2%-2.5%. Adjusted EBITDA is now expected to be in the range of $3.825 billion-$3.875 billion, including the approximate $65 million in adjusted EBITDA in the fourth quarter related to our 53rd week. We are narrowing our adjusted EPS to a range of $2.08-$2.16.

The effective income tax rate is expected to be in the range of 23%-24%, and capital expenditures are unchanged in the range of $1.8 billion-$1.9 billion. With that, I will hand it back to Susan for closing remarks.

In closing, our customers-for-life strategy is building a future-fit distinct Albertsons Companies when it combines scale with local relevance, advanced analytics with deep experience of our teams, and operational excellence with bold growth ambitions. The path forward is clear, the opportunities are significant, and we're just getting started. Q3 demonstrates the strength of this foundation and the acceleration of our transformation. We're not just navigating a competitive and dynamic environment. We're reshaping it. Our investments in digital, loyalty, pharmacy, and retail media are delivering measurable results today, while our AI strategy positions us to lead tomorrow.

When we get together again for our fourth quarter earnings release, we'll share the next evolution of our customers-for-life strategy, building on the progress we've made and the strengths of our model. As we've said, at the core of this evolution is a deeper integration of data and AI across the enterprise. We're not using AI as a short-term lever. We're embedding it into merchandising, labor, and supply chain to create a durable structural advantage. From personalized shopping and Merchandising Intelligence to supply chain optimization, these capabilities are already scaling, driving lower costs, faster execution, and compounding returns that will support growth and profitability for years to come. We're also focused on delivering a more differentiated customer experience.

We'll provide an overview of micro-market merchandising and how we're leveraging our robust customer data to create more curated experiences across assortment, pricing, and promotion, while further strengthening our leadership in fresh and expanding affordable meal solutions. In parallel, we're actively transforming our portfolio for the future. We'll outline how we plan to densify, differentiate, and scale our network, including through strategic partnerships. We're targeting markets where we have strong share and growth, as well as opportunities where we see a clear right to win through new store development and strategic acquisitions that enhance our footprint, drive supply chain efficiencies, and create meaningful synergies. Supporting all of this is our continuous productivity engine. We'll reiterate our commitment to disciplined cost management while outlining the next tranche of initiatives designed to deliver benefits in 2026 and beyond, fueling reinvestment in growth, innovation, and customer value.

As we approach fiscal 2026, we do so with confidence and a clear path to sustainable, profitable growth. To our 280,000 associates, thank you for your passion and commitment. You're the driving force behind this transformation, and together, we're creating an Albertsons that wins for our customers, our communities, and our shareholders today and for the long term. We look forward to continuing this journey and delivering against ur priorities. Thank you, and we'll now take your questions.

Thank you. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. To allow for as many questions as possible, we ask that you each keep to one question and one follow-up. Thank you. Our first question comes from the line of Mark Carden with UBS. Please proceed with your question.

Good morning. Thanks so much for taking the questions. So to start, you continue to make surgical investments in value, and they seem to be gaining traction with the grocery unit growth. At the same time, you've got some of your larger competitors continuing to make price investments as well. Just how is the overall pricing environment lined up relative to your initial expectations, and do you see much risk ahead for the need for incremental price investments?

Hi, Mark. Thanks for the question. So first, I'd start out with, we are taking a very surgical and targeted data-driven approach to our price investments.

I think we've shared that we've seen green shoots in the categories we're investing. I also want to make sure that I call out that price investment comes in three ways for us, well, many ways, but three of them are our investments in loyalty, our investments in pulling forward on promotion, base price investments, and then how we're managing through inflation. We're working very hard to soften the pass-through of inflation to our customers. That said, we are pleased with the progress that we see in our price investments to date. I also want to make sure that you understand that our price gaps are very market-driven, category-driven, and we're very thoughtful about how we're approaching each of these investments. Our price indices versus competitors often miss our personalized loyalty discounts, and that really materially makes a difference in our effective price.

So we do intend to continue to invest very surgically, very thoughtfully. We're pleased with the initial results that we've seen and recognize there are some more surgical opportunities out there. But also, I want to remind you that we look at price as one key piece of the value equation. Along with that are our fresh capabilities, our proximity to our customers, our e-commerce and pharmacy expertise that add value for the customer.

And Susan, I might also add, oh, go ahead, Mark.

I also want to add that another area of key focus for us, which we can talk about later, is our own brand focus. That has been a primary offering that we have put front and center for our customers because to provide value, our Own Brands is one of the tools in our toolbox in order to do that. And it is an area that we are doubling down and amplifying.

That's great. And then just as a follow-up, you guys have talked in the past about your ability to capitalize on some of the drugstore closures that are taking place across the country. How are you progressing with getting your new pharmacy shoppers to cross over and purchase more grocery items? Are you seeing any changes to the timing or lifts, just given some of the macro pressures that you highlighted in the call? Thank you.

Sure. So again, we're very pleased with our pharmacy growth overall. Much of it has come from organic growth inside our store. We're seeing core scripts excluding GLPs grow. Obviously, GLPs play a factor as well. What we typically see is the bulk of our customers are already shopping with us in some way, shape, or form in grocery.

As they convert into the pharmacy, that's when we start to see the deeper relationship. They become more highly engaged. They adopt our digital platforms. They engage in our loyalty programs. And I think we've shared with you in the past, it's somewhere around a one to two-year journey, depending on the customer, to get to a fully robust loyalty platform with us. But that said, again, I want to remind you that the bulk of our customers are already shopping in the store. It's really about deepening that engagement. We're pleased with the acquisitions that we've had, both some that we've paid for, and many of our customers are just choosing to come to us, which we see as a structural advantage from the services that we provide.

Thank you. Our next question comes from the line of Leah Jordan with Goldman Sachs. Please proceed with your question.

Thank you. Hi, Susan and Sharon. Thanks for all the detail on the call today. I know it's a little too early to guide for FY 2026 at this point, but there are a number of potential headwinds investors have been concerned about, such as disinflation and just ongoing volume pressure within food across the industry, along with the lower Medicare drug prices, as you noted in the prepared comments. But then you have your own efforts in driving unit improvements, which we saw this quarter, along with the ongoing productivity efforts. So just seeing if you could comment on a high level the puts and takes we should think about next year and your confidence in being on Algo. Thank you.

So, first and foremost, I want to reiterate our confidence in our Algo. And the reasons we believe in that is our customers-for-life strategy is working. We see that we have outsize upside in pharmacy and our digital customer growth. Our Media Collective, which we've shared, is very early in its journey. We've talked about our focus on value enhancement, which includes pricing. It includes loyalty, as Sharon just mentioned, Own Brands. We're pleased with our technology modernization, but again, that's early stages, and we believe there are more unlocks to come in the future there. And then our productivity agenda continues to deliver quarter-over-quarter, and we only expect that to grow. And I think all of these feed one another. Pharmacy, digital, and loyalty grow engagement in baskets. Media creates high-margin fuel. Our productivity and tech agenda frees up resources to reinvest in value.

So we are very confident in our ability to deliver the algorithm. Sharon, what would you add to that?

I would only add that each of these initiatives, Leah, build on one another. And as you think about it for 2026 and you think about the year, it's gradually and incrementally going to build. So as you're calendarizing the year, think of it in that way. And I think that this concept of gradual and incremental, I don't care who you're talking to about AI and some of the digital transformation that's occurring, that learning is so powerful, and the value that it's bringing to the bottom line just continues to grow. So as we look forward to next year, the other thing about the Algo that Susan didn't say is remember when we gave that we talked about this last quarter. We ran multiple scenarios.

We know that this environment is constantly changing and evolving, and we acknowledge everything that you just said around the different aspects of the macro that could be affecting us, but our plan at this point in time has levers to pull, and again, I will reiterate Susan's confidence in our ability to get into the Algo next year.

Thank you both. That's all really helpful, caller. Just wanted to go back to the lower ID sales guide for this year. And I understand the impact from the Medicare drug prices that you detailed, but within the lower guide, it's still implying a fairly wide range for the fourth quarter. Just maybe more detail on how you're thinking about the key drivers there, what gets you to the high versus low end, and how much is just tied to the uncertainty in the consumer, as you highlighted, just a broadening pressure across income cohorts. And then if you could, any color on kind of where quarter-to-date trends are tracking for ID sales.

I think there are two key areas, Leah, where the guidance range is wide. First and foremost, we have got this 65-70 basis points impact that we are anticipating from the Inflation Reduction Act drug pricing issue. So you pointed that out. We have tried to incorporate that. That is 10 to 16 to 18 basis points on the full year. It is very significant. But within pharmacy, there is also a lot of other opportunities happening.

are scenarios where GLP-1s going, what's going to be the adoption with New Year's resolutions around weight loss, the pill that's coming out for GLP-1s. So there is upside in our mind depending on how each of those play out. We're also keeping, I would say, a cautious view around industry units. You pointed it out on the units in the industry, and that can be ranged. So within those ranges, we're keeping everything that we currently see in mind. And again, I would say this, when you take out the impact of the Inflation Reduction Act on the drug pricing, we are very much where we expect it to be at this point in time.

Thank you. Our next question comes from the line of Edward Kelly with Wells Fargo. Please proceed with your question.

Yeah. Hi. Good morning. I just wanted to follow up on that, the Algo next year, maybe to start. And I just want to make sure, are you saying that if the backdrop stays where it is currently from a unit volume standpoint and we have slightly less pricing, which obviously is going to put some pressure on IDs, that you still think that you can get into your Algo next year? If that's the case, maybe can you just talk about what the levers are that you might be pulling in order to do that? And then big picture here, you maybe talk about the temptation to move a bit faster from an investment standpoint to generate longer-term growth versus the desire to deliver even now growth in line with the plan. 

Hi. And I'll start, and I'll ask Sharon to chime in as well.

So as she stated just a couple of seconds ago, one of the pivotal points of our strategy is our ability to be agile. And recognizing that the market is dynamic, there are different levers that we can pull to meet the Algo. We've continued to talk about our acceleration in digital platforms, Merchandising Intelligence, our pharmacy and customer experience, our price investments, and so forth. We believe they'll deliver outsized growth. And a lot of that growth is building as we exit 2025 and continues to grow as we go throughout 2026. We recognize there are some pressures from the Pharmacy Inflation Reduction Act that we just spoke of. I want to make sure everybody understands too, though, that that is a top-line pressure. It is not a bottom-line pressure. It's actually net neutral to the bottom line. Sharon, what would you add?

I want to make sure that I understand your question because with the Inflation Reduction Act, the 16-18 basis points that we have quantified on the full-year comp for 2025, that is only two periods for us this year. So you can see the magnitude of that for 2026. It is possible. We said that we would have a 2+% comp store sales increase because of this reduction act to that point. It is possible the comp will be on a comparable basis. It won't be comparable. There will be a significant headwind, could be as much as 125 basis points to the comp. And if that was the case, you may not deliver the comp number with X, the Inflation Act, it would be in the 2+. But it may be different depending on how many more drugs get added to that.

So we've got to think through that. When we're talking about the algorithm, we are talking about, on a comparable basis to 2025, we expect comp store sales growth to be 2+% before the adjustment for the Inflation Reduction Act, and that Adjusted EBITDA will grow slightly faster than that.

Got it. And then just a follow-up. I was hoping maybe you could talk about the progress of the cost savings and how you're tracking so far against the plan and the cadence in terms of savings as you think about 2026.

Yeah. So I'll start off and just say we're executing very well against our $1.5 billion plan. As we've stated, driven by technology, automation, analytics. We've also undergone process redesign across the company in merchandising, supply chain, store operation. You can see the results that we've shared in our SG&A. We're very pleased with what's flowing through to the bottom line there from a productivity perspective. That said, though, part of our productivity is meant to fuel our growth in terms of the reinvestment in price, how we're structurally managing our store labor, and developing stronger customer experiences both in store and online. Sharon, anything you want to offer about our outlook on productivity?

When we get into 2026, in our Q4 discussion that Susan shared in our call, we'll also be giving you an update on productivity. We do see new opportunities with all of the things that we've talked about, and we'll be giving you an update on our productivity agenda. To Susan's point, we are achieving our productivity and to some extent exceeding our productivity. You can see that in the numbers that we're delivering. We expect to continue to be pushing that heavily as we go into 2026. These opportunities, of course, are like everything I keep saying. They're gradual and incremental because they're building on each other.

Thank you. Our next question comes from the line of John Heinbockel with Guggenheim Securities. Please proceed with your question.

Hey, Susan, you guys have acquired a lot of customers, this 12% growth year-over-year over the past couple of years. Can you talk to wallet share? You also talked about that 1-2-year journey with pharmacy. When I think about maybe your upper decile loyalty members, average loyalty, brand new, can you maybe at least give us some guidance on how those wallet share numbers differ? Is the highest decile 2x the average? What does that look like? Is there much difference, I guess, with a pharmacy customer? Some of those new ones are still lagging, right, the wallet share of mature pharmacy customers?

Thanks, John. Our digitally engaged customers spend approximately two to three times more than those not engaged in digital. Engagement rises further as they broaden through our ecosystem, so as they engage in online ordering, in loyalty, in different features on our apps, our health as an example, our pharmacy. When pharmacy enters that ecosystem, we start to see that number grow, 4x, 5x. Our most loyal customers definitely have outsized growth in lifetime value. Our focus there is to continue to build upon that strength as customers engage with us, delivering more personalized journeys. We talked about our AI assistant, offering meal planning. We can help you curate a party or different occasions. And all of those things help deepen baskets and repeat trips for us.

Okay. Maybe follow-up. You talked about the divisions where you've invested in price. I'm curious, have they crossed over into positive food volume territory? And then maybe related to that, I think you've talked about core and non-core assets and wanting to double down on some of the strongest markets. Do you see potential to exit markets and redeploy those assets and resources to the strongest ones, or not really?

Okay. So with regards to the price investment, I'll speak to it more at the category level. We have seen strong unit improvement in the categories that we've invested. In many cases, they've moved to positive year-over-year. In other cases, the decline has lessened substantially.

As we think about our price investments, I want to remind you too that we've got some areas where we've executed a new low-price campaign, but there are other areas where we're leveraging price in terms of deepening promotion. And as I mentioned before, the mitigation of inflation pass-through. So we're very pleased to see the positive customer response there in share as well. With regards to our fleet, yes, we're evaluating our entire portfolio end to end, as we always do. And I think we mentioned a couple of calls ago that because of the merger, we were unable to conduct some of the normal hygiene that we would do in terms of store closures. And you'll see an outsized list of closures as we exit 2025 based upon that.

As we look forward, yes, we're looking very much at where we're strong and want to grow, again, organically or through acquisition. Then we'll also evaluate markets where we perhaps aren't performing like we should and make the determination on if we can grow, if we can invest differently, and make a change there.

John, I would add to that that we are also looking to materially sophisticate our real estate operations in 2026. In addition to that, we are looking at all non-core, when I say non-core assets, surplus real estate, other things like that. Everything is being evaluated at this point in time. I want to make sure, however, that we are not having a similar conversation to other competitors in the grocery landscape. We did not have material-type investments like others. And in no way are we indicating or signaling any type of massive write-off in front of us.

Thank you. Our next question comes from the line of Rupesh Parikh with Oppenheimer & Co. Please proceed with your question.

Good morning, and thanks for taking my question. So just going back to, I guess, the gross margin line, we've seen now improvement for really the last two or three quarters. It's the lowest decline that we've seen all year. Sharon, just curious how you're thinking about Q4, some of the puts and takes there, and whether you'd expect further improvement versus what we saw in Q3.

Yes. I think as you think about Q4, you should think about it more like Q2. And here's the reason. In the third quarter, we saw an exceptionally strong pharmacy business. It was in the value-added side of the business, which brought some incremental profit. It really moved from Q4 into Q3 because of what happened nationally with flu and fear of COVID. We saw an acceleration into the third quarter that will then turn itself around in the fourth quarter. Fourth quarter pharmacy margin is never as strong as Q3. So I think if you model out more like Q2, you'll be in the neighborhood.

Great. Then maybe my follow-up question, just going back to the GLP-1 conversation, given some of the enthusiasm out there on the pill format, does your team at this point think it sounds like it could be more of a tailwind or maybe even a bigger tailwind as we go into next year? Is that the current thought process, or just any thoughts on how your team's thinking about it?

Yes, we absolutely think it can be more of a tailwind as we move forward with the accessibility and delivery mechanism change, meaning pills versus shots and so forth.

Yeah. And Rupesh, I think the inflection on the pill version of the GLP-1, it is not—so it's not broadly used, obviously. And it will depend likely on the side effects. But at this point, we do not see it having a material impact one way or the other on the EBITDA in pharmacy. This is really about top line, and it's really about our patients. If they could come out with a pill and provide our patients with a pill form versus the injection form, that would be great for the patients. But from a material P&L point of view, I don't see it in the short term as something that you need to worry about from a modeling point of view as it relates to adjusted EBITDA.

Thank you. Our next question comes from the line of Tom Palmer with JPMorgan. Please proceed with your question.

Good morning, and thanks for the question. I wanted to ask again on just the price investment side. It sounds like there was perhaps a more intense promotional environment in November, especially when SNAP benefits were deferred. One of your competitors discussed the likelihood of higher promotions persisting into subsequent quarters. I think you earlier addressed your tactical actions on this call, but I wondered if you might talk maybe more broadly about what you're seeing across the industry and whether we should think about maybe more promotions funded by food producers or if more of that funding is coming from kind of the grocer side. Thank you.

Hi, Tom. So with regards to pricing, yes, we also saw a more aggressive promotional environment this year. And certainly, it was accelerated throughout the holiday season. As we've mentioned before, our customers are absolutely more price-sensitive. Our value-focused competition is clearly showing growth. But that said, our market density and strong locations, combined with our loyalty and AI-driven personalization, help us create a more durable edge to serve our customers faster and at a closer proximity while protecting value. So we absolutely see promotional investments continuing.

By the way, by nature, we are a promotional merchant. That's who we are. That's who we've always been. And with our Buying Better Together work, where we've spoken before about how we're leveraging our size and scale as a national company to procure a lower cost of goods to secure more promotional funding where it makes sense, all of those things will help us support where we need to be to meet the customers where they are in terms of price impression.

And the timing for us, when you think about our productivity related to buying together, where we're bringing our buying at the divisions and buying together at the national level, the timing of that and the fact that that is an opportunity in front of us, it completely is in line with the timing of the nature of your question. So obviously, that is opportunistic at the moment.

Thank you. Our next question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

Hi, this is Zach on for Simeon. Thanks for taking our questions. You mentioned a sequential improvement in unit trends. Can you speak to the composition of that trend? Is it loyal families spending more? Is it new customers? And how much is coming from digital versus in-store? Thanks.

So what I would say, just a reminder too for everyone, that what we've seen in the industry is units were slightly positive in the first quarter, turned negative in the second quarter, and remained flat to negative in the third quarter. And obviously, within that backdrop, our unit trends improved sequentially, and we credit that to our surgical price investment and to our loyalty-led value.

I would say that we continue to see customers very price-sensitive, thinking about how they prioritize essentials. We're seeing some smaller baskets in those price-sensitive customers, and obviously, some trade-down that's happening as well there. We know that customers are more value-aware, that their spending remains relatively stable for us. And again, our personalized promotions, our targeted price investments, our Own Brands innovation, all of these are designed to support unit recovery over time.

Thank you. And as a quick follow-up regarding digital sales, what does the economic model look like today, and where are you on the profit curve there?

Sure. So I'll start and ask Sharon to chime in on some of this. But as a reminder, it continues to be a very powerful engine for us. We shared that sales were up 21%. We're very pleased with our penetration growth quarter-over-quarter. And also, we have a structural advantage in that for last mile, over half of our orders are delivered in less than three hours. And I think we shared 95% of our households are eligible for Flash Delivery, which means as fast as 30 minutes. So that reinforces speed and convenience for us. From a profitability perspective, we continue to see margin improvement as we scale adoption and embed AI into everything that we're doing end to end. And Sharon, do you want to add any color on profit?

Only that we had said that we expect that as we continue to grow, we will get to profitability, possibly at the end of this year or going into next year. The volume levers, obviously, the fixed cost. And when we're talking about profitability, we are not including retail media, and we are fully allocating that P&L with fixed cost.

Thank you. Our next question comes from the line of Kelly Bania with BMO Capital Markets. Please proceed with your question.

Hi. Thanks for fitting us in. Sharon, I wanted to go back to the efforts to shift the buying to a national buying campaign rather than more localized. Just wondering if you could talk about how that is progressing. Did the savings—are they starting to come through as you expected? And what does that imply for maybe the gross margin outlook into the fourth quarter and next year?

When we laid out our productivity, Kelly, we said that we expected the big benefits from that to come in year two and year three of our productivity program. Thus, the response to the earlier question that as we are seeing this more competitive environment, this is still in front of us. I'm going to turn it over to Susan in a second because the other thing that we're doing simultaneously is in our four big bets on AI. Merchandising Intelligence is one of those. And that provides a very data-driven way to approach this material change in the way we're working. And I'll let Susan talk about the merchandising organization and how that's transformed since she took this role. So Susan, you want to just add a little bit to that?

Of course. And I'll just tag on to your AI comment as well. The Merchandising Intelligence that we've listed under AI does exactly what Sharon described. And it's also meant to help us not only create better customer experiences, create curated assortment, but also optimize the profitability of our price and promotion end to end. So we're very excited about our proprietary work there.

From an internal construct perspective, as we've shared before, we've got a new merchant. Michelle Larson took the seat a few months ago, and under her leadership and with the collaboration across all of our divisions, we're actually very bullish about what we're going to be able to capture from a benefits perspective as we leverage our size and scale to buy better together. We've got alignment across every single one of our divisions. We've got a common calendar. We're building the right processes and tools, as I just mentioned, from an AI perspective to support all of this, so we're very bullish about the future potential benefits that we will deliver in 2026 and beyond.

That's helpful. Can I just follow up a little bit on the discussion of the units? I believe the plan was to try to approach flattish units by year-end. I was wondering if you can talk about if that's possible, still on the horizon in terms of the core grocery categories, and can you also talk about the performance of fresh versus branded? I think you talked a little bit about private label, but just some of the growth in some of those categories versus your expectations.

Albertsons (ACI) Q3 2025 Earnings Call Transcript

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