Albertsons heads into its fiscal second-quarter report with something to prove. The company opened the year pitching fiscal 2026 as a return to earnings growth and the start of its long-term algorithm. It has since cut its full-year adjusted EPS outlook to $1.75 to $1.85, down from $2.22 to $2.32. That is roughly a 20% reset. When the grocer reports before the bell on October 13, the question is whether that lower bar is believable or whether the slide has further to run.
The quarterly expectations already reflect the damage. Analysts are looking for adjusted earnings of $0.31 a share, down about 26% from $0.42 a year ago, on revenue of roughly $18.83 billion, essentially flat with last year. The Earnings Whisper of $0.34 sits modestly above consensus, so the more engaged crowd thinks the Street may have cut too aggressively. The full-year picture is messier. Revenue consensus of $82.45 billion sits comfortably inside the new $81.93 billion to $82.76 billion range. The full-year EPS consensus of $2.27, however, still sits well above the revised guidance and matches the old midpoint, which suggests many annual estimates have not caught up. Whatever the quarter shows, expect those numbers to converge on management's range.
Flat sales are not alarming by themselves. Management warned early that the Inflation Reduction Act's Medicare drug pricing program would shave about 150 basis points from identical store sales this year. It guided to just 0% to 1% reported growth, or 1.5% to 2.5% excluding that drag. That pharmacy pricing is largely neutral to EBITDA. So the cleanest test of underlying health is the ex-IRA identical sales figure. A print near the middle of that range would support the idea that the top line is weak mostly on paper. Anything below it would point to the genuine demand softness the company flagged: lower-income shoppers trading down, faster moderation in GLP-1 prescriptions, and food deflation. The pharmacy hit in the fourth quarter ran at about twice what management had projected, so credibility on these estimates matters.
Units are the other tell. Management dropped its earlier hope of near-flat traffic entering the year and pushed positive units into the back half. With the second half now approaching, this report should show whether units are at least improving. If units are not turning, a second-half recovery starts to look like a wish rather than a plan.
On margins, the company guided gross margin flat to slightly better after narrowing its declines through last year. It also lifted its productivity program to $2 billion over three years, with artificial intelligence initiatives expected to start paying off. The guidance cut implies something on the cost or margin side has not gone to plan. Investors need evidence that the productivity savings are real and are not simply being spent on price. Digital remains a genuine bright spot. Penetration crossed 10% late last year, loyalty membership topped 51 million, and e-commerce was nearing profitability. Continued gains there would help, but they cannot carry the story alone. Elevated capital spending of $2.0 billion to $2.2 billion for new stores and remodels is another reason margins carry weight.
The market has already rendered a verdict. Shares have fallen 6% since the last report while the S&P 500 gained about 4%. At $11.75, the stock trades far below its 200-day moving average of $15.39 and in the lower half of its post-earnings range of $10.86 to $13.03. That entire range sits below last quarter's trading band. Sentiment has improved from deeply bearish to merely bearish, consistent with a crowd that thinks the worst is priced in. That creates room for relief, but only if management convincingly holds the reduced outlook. Reaffirming $1.75 to $1.85, alongside steady ex-IRA sales and signs of unit stabilization, would suggest the reset was a one-time event. Another trim would tell investors the recovery thesis is still unraveling.