Big-Box Briefing: What’s fueling Albertsons’ identity crisis as it accelerates turnaround efforts
The grocery business has been uniquely challenging in 2026, thanks to sky-high inflation. But Albertsons’ second-quarter earnings call on Tuesday was still unusually dour.
In the second quarter, Albertsons reported that comparable sales declined 0.8% year-over-year. Meanwhile, net income came in at $52 million, down from $168.5 million a year ago. The grocer also pulled its full-year guidance.
Albertsons had already been in the midst of a turnaround. Earlier this fall, the company brought on former eBay and Hewlett-Packard CEO Meg Whitman in the newly created role of executive chair, serving as a strategic advisor to CEO Susan Morris. But Whitman still said during the earnings call that the company still needed to “move faster.”
“Our performance has fallen short. Sales and earnings growth have not met our expectations.” Whitman said. Whitman said that she and Morris agreed that “everything should be on the table as we figure out how Albertsons should be structured to better compete in the years ahead.”
At the heart of the issue, analysts say, is the fact that Albertsons has not carved out a unique enough value proposition for a more competitive era of grocery. These days, companies like Albertsons aren’t just competing with traditional grocers. They’re also increasingly competing with club retailers like Costco, and tech and delivery giants like Amazon and Instacart.
The pressure on Albertsons business “mostly arises from the fact that consumers are becoming far more discerning over where they shop for groceries,” Neil Saunders, managing director at GlobalData Retail, said in emailed comments. “And on this front, the proposition of Albertsons and its various banners fails to add enough value.”
Now, the company is on a mission to consolidate — and potentially sell off — parts of itself. Albertsons is a sprawling business, consisting of more than 2,200 stores and 22 different banners, including Safeway, Jewel-Osco, ACME and Tom Thumb. Last quarter, Albertsons announced ACI Edge, a corporate restructuring initiative.
As part of that, Albertsons organized its teams around four geographic regions — California, South, East and West. Previously, teams had been organized around 11 different regions. ACI Edge also centralized the center store merchandising team.
During the earnings call, Morris said Albertsons was working aggressively to reduce costs and improve the variety and quality of products it carries. But she didn’t delve too deeply into specific actions and declined to comment on the performance of individual banners.
Analysts have their own thoughts on where Albertsons’ value proposition has started to go awry.
As Bryan Gildenberg, founder and CEO of Confluencer Commerce, put it, what Albertsons has historically been good at is being a “relatively convenient grocery store” that may be a person’s second trip if they couldn’t get everything they wanted at their first grocery store.
“They were never the sharpest price in the market,” Gildenberg added. But, he said, the company has good real estate and has historically been a good operator. “They were very good at finding product that they could acquire at a lower cost than some other [companies] could, and then not discounting it excessively, and that created a pretty strong margin,” Gildenberg said.
But now, “the competition for that secondary trip has gotten way more intense,” Gildenberg said. Shoppers can also now buy much of what they might have previously bought on their second grocery run online.
In turn, “stores need to offer inspiration and excitement in food,” Saunders said. “Others, including cheaper players like Aldi, are offering this. Albertsons is not, so it feels behind.”
Gildenberg also thinks Albertsons’ Safeway banner in particular has struggled. “Safeway has been losing market share to Costco in groceries for 20 years,” Gildenberg said. And now, Safeway also faces increased competition from Sprouts, which “is a value positioning for premium products in a way that can really disintermediate Safeway,” Gildenberg said.
He also thinks that Albertsons — like Kroger — “couldn’t figure out whether they wanted to be an omni-channel operator or just simply outsource their omni-channel logistics and customer interface to Instacart.” Albertsons has invested significantly in both its e-commerce business and its retail media capabilities. While the digital business is growing — digital sales were up 11% year-over-year during the second quarter – those investments become harder to justify at a time when the overall business is struggling.
If Albertsons wants to promote itself as more of a “destination grocer,” Gildenberg believes the company will need to come up with “a stronger perishables proposition, a more coherent communication of what Albertsons stands for in the marketplace, and a more thoughtful understanding of what category-level economics need to look like.”
Saunders believes that too many of Albertsons’ stores are “old-fashioned and tired.” “In some, the shopping experience is dispiriting and looks like it’s [stuck] in the 1990s,” he said. He also thinks that while some of the company’s private label lines, like Signature Select, are pretty good, “Albertsons needs to work harder to showcase this in stores. Things like Signature Select pizzas should be far better as movie night meals or introduced to more consumers via tastings or special meal deals.”
Simplifying the business — by selling off some banners — is an option. But Albertsons is still licking its wounds from its failed merger with Kroger, which was blocked by a federal court over antitrust concerns in 2024.
Albertsons then sued Kroger, accusing the grocer of violating the merger agreement by failing to use its “best efforts” to get regulatory approval, such as by refusing to divest certain assets that could have helped with antitrust concerns.
Just this week, it was reported that Albertsons is seeking at least $8 billion from Kroger over the failed merger, according to recently unsealed court filings.
Saunders said that if Albertsons settles with Kroger, it may provide “temporary relief.” But even that would only come as relief on the cost side — it wouldn’t impact what customers see.
“This lifeline cannot be relied upon as a savior of the business,” he said.
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