(Reuters) - Albertsons Companies topped Wall Street expectations for quarterly profit and revenue on Tuesday, on the back of steady demand for groceries and pocket-friendly private label brands.
Consumers in the U.S. have displayed a growing affinity towards private label brands, as they look for cheaper options amid a cost of living crisis.
In May, Albertsons consolidated products from its private labels Signature Farms, Signature Care and Signature Cafe, which include ready-to-eat meals and condiments, under a single label — Signature Select.
Albertsons has also bolstered its loyalty program, which has been drawing customers to its stores despite the grocer's relatively higher pricing when compared to retail bellwether Walmart (NYSE:WMT), according to analysts. In the quarter, membership for the loyalty program rose by 16% to 35.9 million.
However, gross margins declined 91 basis points to 27.7% compared with 28.1% a year earlier, due to delivery and warehouse costs and rise in store thefts, the company said.
Strong digital sales have also driven revenue for the food and drugs retailer at a time when its pharmacy business is seeing a rapid normalization following gains from COVID-19 vaccinations.
The company's $25 billion merger with peer retailer Kroger (NYSE:KR), which was announced in October 2022, has faced pushback from workers and consumer welfare groups even as it awaits a verdict from the Federal Trade Commission.
For the quarter ended June 17, the company's identical sales rose 4.9%, compared with an increase of 6.8% a year earlier. However, net sales and other revenue of $24.05 billion in the period beat analysts' average expectation of $23.95 billion, as per data from Refinitiv.
Excluding items, the retailer's profit was 93 cents per share, beating Street estimates of 85 cents.