Inflation is a Boon for Albertsons Stock

Grocery chain operator Albertsons NYSE: ACI stock has been hitting all-time highs thanks to the boost in food inflation. The Company is growing with five new stores and 33 upgraded remodeled projects. Albertsons also added 320 new Drive Up & Go (DUG) locations in fiscal Q1 2021 for a total of 1,740 locations up 75% YoY. The goal is 1,950 locations by end of Q2 2021. The pandemic has forced Albertsons to embrace the digital channel, sustainable food trends, and integrate digital innovation as its paying off tremendously. The Company also expects to achieve $1.5 billion in gross savings by the end of fiscal 2022. The pharmacy has administered over six million COVID vaccinations. The rise in food inflation should expand margins in its 2,278 retail food and drug stores across 34 states and Washington D.C. under 20 different brands ranging from Albertsons, Safeway, Vons, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Carrs, Kings Food Markets and Balducci’s. Prudent investors seeking exposure in benefitting from food inflation can watch for opportunistic pullbacks in shares of Albertsons to build a position.

Q1 Fiscal 2021 Earnings Release

On July 29, 2021, Kroger released its fiscal first-quarter 2021 results for the quarter ending May 2021. The Company reported an earnings-per-share (EPS) profit of $0.89 excluding non-recurring items versus consensus analyst estimates for a profit of $0.61, a $0.28 beat. Revenues fell (-6.4%) year-over-year (YoY) to $21.3 billion beating analyst estimates for $20.51 million. Identical sales decreased (-10%) on a two-year stacked basis identical sales growth was 16.5%. Sustained digital sales levels on a two-year stacked basis was 276% YoY. Albertsons CEO Vivek Sankaran commented, “Our performance is clear evidence of the structural enhancements we have made to our business, as well as our ability to retain market share gains compared to pre-pandemic levels. We are closer to our customers than ever before and are well positioned for continued success as we execute on our strategic priorities, leveraging our strengths in fresh, Own Brands and our accelerating digital transformation."

Upside Guidance

Albertsons raised fiscal full-year EPS guidance to $2.20 to $2.30 range versus prior guidance of $1.95 to $2.05 range compared to the $1.95 consensus analyst estimates. The Company sees identical sales in fiscal 2021 in the range of (-5%) to (-6%) representing a two-year stacked growth rate of 10.9% to 11.9% from previous 9.4% to 10.9%.

Conference Call Takeaways

CEO Sankaran set the tone, “Our ID sales grew 16.5% on a two year basis, and we continue to gain market share in food on a one-year basis and in MULO, which includes most food, drug, mass, club, dollar and military on a two year basis. In addition, we achieved EBITDA of – adjusted EBITDA of $1.3 billion and adjusted EPS of $0.89 a share ahead of our expectations. Against the backdrop of growth exceeding 200% in every quarter in fiscal 2020, our digital initiatives continued to resonate with our customers, and we have retained the sales levels we achieved last year with digital sales virtually flat year-over-year in Q1 and a two year stacked ID sales growth of 276%.With all the options we have in place, we have achieved 95% of customer coverage with e-commerce and retention has been strong. At the same time, we have seen a pickup in in-store transactions versus Q1 2020, and many of those incremental in-store shopping trips are focused on fresh. At the end of Q1 2021, we had 3.6 times the number of omnichannel households than we had two years ago, in 2019. We've seen as that as customers move into omnichannel, they also increased their spend in our stores with a net growth of 17% per household spend in the quarter and a total spend rate of two times that of an exclusively in-store shopper.” The Company increased actively engaged customers by 13% with a 94% retention rate YoY, “Remember that actively engaged customers spent four times more with us. In summary, our strategy of building lasting relationships with customers through a combination of digital and in-store engagement is driving our top line. Overall, our strategy is focused on four priorities: in-store excellence, accelerating our digital and omnichannel capabilities, driving productivity, and strengthening our talent and culture.”

ACI Opportunistic Pullback Levels

Using the rifle charts on weekly and daily charts can provide a near-term perspective of the playing field for ACI stock. The weekly rifle chart formed an explosive breakout that peaked at the $30.37 Fibonacci (fib) level. The weekly 5-period moving average (MA) is at $23.23 with upper Bollinger Bands (BBs) at $27.01. The weekly 15-period MA is rising at $20.85. The weekly stochastic is rising through the 80-band. The daily rifle chart uptrending has a rising 5-period MA at $28.37 with upper BBs at $31.90. The daily market structure low (MSL) buy triggered above the $20.37 level. The daily 15-period MA is also rising as a laggard support at $24.16. Prudent investors can watch for opportunistic pullback levels at the $26.44 fib, $25.38 fib, $25.03 level, $24.32 fib, $22.81fib, and the $21.55 fib. The upside trajectories range from the $32.29 fib level up to the $38.35 fib level.