Over the past six months, Albertsons’s stock price fell to $14.56. Shareholders have lost 16.2% of their capital, which is disappointing considering the S&P 500 has climbed by 8.2%. This may have investors wondering how to approach the situation.
Is now the time to buy Albertsons, or should you be careful about including it in 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?
Even though the stock has become cheaper, we’re cautious about Albertsons. Here are three reasons why ACI doesn’t excite us, plus one stock we’d rather own.
1. Lack of New Stores, a Headwind for Revenue
A retailer’s store count often determines how much revenue it can generate.
Albertsons operated 2,243 locations in the latest quarter, and over the last two years, has kept its store count flat while other consumer retail businesses have opted for growth.
When a retailer keeps its store footprint steady, it usually means demand is stable and it’s focusing on operational efficiency to increase profitability.
2. Low Gross Margin Reveals Weak Structural Profitability
We prefer higher gross margins because they not only make it easier to generate more operating profits but also indicate product differentiation, negotiating leverage, and pricing power.
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 27.5% gross margin over the last two years. That means Albertsons paid its suppliers a lot of money ($72.53 for every $100 in revenue) to run its business.
3. Weak Operating Margin Could Cause Trouble
Operating margin is an important measure of profitability for retailers as it accounts for all expenses necessary to run a store, including wages, inventory, rent, advertising, and other administrative costs.
Albertsons’s operating margin has generally stayed the same over the last 12 months, averaging 2% over the last two years. This profitability was lousy for a consumer retail business and caused by its suboptimal cost structureand low gross margin.
Final Judgment
We cheer for all companies serving everyday consumers, but in the case of Albertsons, we’ll be cheering from the sidelines. After the recent drawdown, the stock trades at 6.7× forward P/E (or $14.56 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are more exciting stocks to buy at the moment. We’d suggest looking at an all-weather company that owns household favorite Taco Bell.
Stocks We Like More Than Albertsons
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum 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 Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
