What a brutal six months it’s been for Albertsons. The stock has dropped 28.9% and now trades at $11.70, rattling many shareholders. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
Is there a buying opportunity in Albertsons, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Do We Think Albertsons Will Underperform?
Despite the more favorable entry price, we’re cautious about Albertsons. Here are three reasons why there are better opportunities than ACI, plus one stock we’d rather own.
1. Same-Store Sales Falling Behind Peers
Same-store sales show the change in sales for a retailer’s e-commerce platform and brick-and-mortar shops that have existed for at least a year. This is a key performance indicator because it measures organic growth.
Albertsons’s demand within its existing locations has been relatively stable over the last two years but was below most retailers. On average, the company’s same-store sales have grown by 1.8% per year.
2. Low Gross Margin Reveals Weak Structural Profitability
Gross profit margins are an important measure of a retailer’s pricing power, product differentiation, and negotiating leverage.
Albertsons has bad unit economics for a retailer, signaling it operates in a competitive market and lacks pricing power because its inventory is sold in many places. As you can see below, it averaged a 27.3% gross margin over the last two years. Said differently, Albertsons had to pay a chunky $72.75 to its suppliers for every $100 in revenue.
3. Weak Operating Margin Could Cause Trouble
Operating margin is a key profitability metric because it accounts for all expenses necessary to run a store, including wages, inventory, rent, advertising, and other administrative costs.
Albertsons was profitable over the last two years but held back by its large cost base. Its average operating margin of 1.3% was weak for a consumer retail business. This result isn’t too surprising given its low gross margin as a starting point.
Final Judgment
Albertsons falls short of our quality standards. Following the recent decline, the stock trades at 6.7× forward P/E (or $11.70 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now. Let us point you toward an all-weather company that owns household favorite Taco Bell.
Stocks We Would Buy Instead of Albertsons
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
