Albertsons Cuts Sales Forecast as Grocery Shoppers Cut Back

Grocery chain Albertsons is predicting slightly weaker sales amid more cautious lower-income consumer spending.

The company on Thursday (July 23) released earnings showing the company lowering its guidance for the fiscal year, projecting decreases of 1.5% to 0.5%, compared to an earlier forecast of flat sales to a 1% increase. CEO Susan Morris said this is happening as shoppers switch to private label products.

“We’re seeing a shift to value packaging, trade-downs,” she said during an earnings call. “I think we’ve talked about this before in certain commodities, and again, it’s a very bifurcated situation. Lower-income customers are shifting more to cheaper proteins, as an example.”

Higher-income shoppers, meanwhile, appear more resilient, though the company is also dealing with higher supplier prices.

Research by PYMNTS Intelligence shows that while many consumers are feeling economic pressure, they aren’t always ready to cut back.

Eighty-three percent of consumers surveyed by PYMNTS say that everyday prices increased, while close two-thirds said external forces were affecting the U.S. economy a great deal or a lot.

In addition, 58% said they expect larger economic forces to impact their personal finances over the next six months, though only 38% planned to cut spending in the next three months.

“At first glance, those numbers seem difficult to reconcile. If consumers remain worried about prices and the economy, why aren’t more preparing to cut back?” PYMNTS wrote.

“The answer may be that households are not making spending decisions according to the categories used by economists, merchants or card issuers. They are making them according to their own priorities.”

Meanwhile, Albertsons said its digital efforts and loyalty programs remain important factors in driving growth and customer engagement, with digital sales up 13% for the quarter with penetration climbing to nearly 10.5%.

“Our loyalty ecosystem continues to scale personalization and we’re seeing clear behavioral benefits,” Morris said. “Engaged members shop more frequently and with higher average baskets than non-members, contributing meaningfully to both sales growth and customer lifetime value. Execution remains strong across our fulfillment network again this quarter.”

The fastest growing segment of the company’s digital business is still its flash delivery service, the CEO said, with Albertsons’ eCommerce unit profitable during the first quarter.

“This milestone demonstrates that we are successfully growing digital sales while improving the underlying economics of the platform and creating a business that can generate profitable growth over time,” Morris added.