Albertsons Earnings: Strength Suggests Turnaround Is Progressing Independent of Kroger Deal

Our $29 per share valuation of no-moat Albertsons should not change significantly after it reported fiscal 2022 earnings slightly ahead of our expectations (propelled by 5.6% fourth-quarter identical sales growth). We are encouraged that the company continues to progress in improving efficiency and bolstering its omnichannel capabilities, particularly important as we remain skeptical that its proposed acquisition by narrow-moat Kroger will pass regulatory muster. Our long-term standalone forecast for Albertsons still calls for low-single-digit top-line growth and mid-single-digit adjusted EBITDA margins over the next decade. We believe prevailing sentiment does not adequately credit Albertsons’ ability to improve its private label and omnichannel capabilities independent of Kroger (our valuation is on a standalone basis).