Cutting to Fund the Fight

Research evidence excerpt

Cutting to Fund the Fight

eclines reverse. on share loss concerns, CFO search, and lack stabilize share, before thinking about margin.

of vision on margin expansion.

Key Debates: Catalysts

Debt reduction, dividend, more buybacks or all 3.

1. Will Albertsons hold market share & what does the

normal comp look like? Near term ACI’s likely to Multichannel initiatives scale.

continue to lag the broader industry while initiatives

build in a choppy industry backdrop. We see 2% as Loyalty rollout catching on drives 3x the spend/HH.

sustainable long term reflecting multichannel

Prepared meal offering, enhanced private label aid share.

enhancements, PL expansion, and loyalty/

personalization. The $1.5bn productivity initiative raised to $2bn in 4Q25

from enhanced IT systems and processes gain steam could

2. Will EBIT margin hold 2%+? No. We do not

underwrite near term margin expansion at ACI given it be $2.5bn though?

price reinvestment and an inflation pressed consumer.

A reflation wave could emerge on oil pass through. Longer term, there is opportunity to extend margin

through higher margin ancillary streams as well as

execution on planned cost out. Risks

Amazon/Walmart/Costco are bigger, better capitalized

3. Valuation: We see a mid to HSD multiple as fair value competitors. ALDI/DG/C-Stores win fill in trips.

given the competitive backdrop. Applying a discount to

25%+ on shelf price premium vs. the leading mass relative peer multiples such as KR and Ahold at 11-13x

and more in line with ASO/M at 6-10x . We model ACI merchant hard to sustain, although pricing is

with a high single digit FCF Yield, suggesting the competitive vs traditional grocers like KR.

market views the earnings at risk of secular decline. We