Albertsons Companies had a weak start to the fiscal year, with subdued sales signaling the company is losing market share.

For the first quarter ended June 20, net sales and other revenue edged up 0.2 per cent to $24.9 billion, with a 0.8 per cent decline in identical sales offset by higher fuel sales.

Pharmacy and digital remained areas of strength, with pharmacy sales continuing to grow despite ongoing Inflation Reduction Act headwinds and digital sales increasing 13 per cent.  

While digital sales are growing at a nice clip, GlobalData MD Neil Saunders noted that the performance from physical stores is considerably worse.

“This inability of Albertsons to hold on to physical spending is worrying for two reasons,” he said. “First, it’s the arena in which Albertsons drives better metrics such as average spending and basket size and is able to differentiate itself most strongly from competitors. Second, physical sales attract better margins than digital where the costs of fulfilment dampen profitability.”

The problems with most Albertsons stores, according to the analyst, is that they lack inspiration and some feel modestly depressing, combined with the fact that prices are not particularly competitive.

“The particular problem in grocery is that even small sales declines have a big deleveraging effect. Other factors impacting this negative trend include higher interest costs, lower margins from price investments, and some ongoing litigation expense related to the failed Kroger merger,” Saunders said.

On the bottom line, the company’s net income slid 64 per cent to $84.7 million.

For the full year, the retailer expects same-store sales to fall by 0.5 per cent to 1.5 per cent.

Saunders said the guidance is particularly worrying as it indicates that the weak performance in Q1 is not an exceptional blip in trading but will be the new normal for the balance of the year.

“Like many mainstream grocery players, Albertsons is now in a tough spot,” he said. “Having a weaker proposition is something that today’s consumers are far less willing to forgive. And having a huge legacy business to turn around with limited financial means makes the work of building back sales growth incredibly difficult.”

Last year, the company reported a 2 per cent uplift in identical sales, but its net income dropped from $958 million to $217 million.