Albertsons Expects Higher Inflation in Coming Months From Labor, Supply-Chain Costs

Albertsons Cos. projected higher inflation for the rest of the year, driven by higher supply-chain and labor costs across the food industry.

The Boise, Idaho-based supermarket chain is passing through some price increases to shoppers but said it is also offering cheaper alternatives. Executives said consumers are still spending heavily on groceries as they stay at home and cook more than they did before the pandemic.

“We have not seen material change in customer behavior,” Chief Executive Officer Vivek Sankaran said Monday during a call with analysts.

Food companies say they have been wrestling with rising costs, including for labor, transportation and commodities such as fuel in recent months. Some supermarket executives say they expect consumers’ grocery bills to keep rising because some food manufacturers are raising prices or pulling back on planned discounts. Consumers will have fewer varieties as many manufacturers cut down offerings to give priority to key items.

Consumer spending habits and recent inflation has helped Albertsons, Mr. Sankaran said. Food retailers’ sales remain high as products get more expensive, though their profit margins take a hit when they are absorbing cost increases. Kroger Co. , the nation’s biggest grocery chain, said last month that its margins declined because it spent more on bringing prices down.

Manufacturers say various factors are pushing up prices for retailer customers. PepsiCo Inc. said this month that it faces higher costs of aluminum cans, plastic bottles and labor. General Mills Inc. said last month that a shortage of truck drivers, more expensive ingredients and other disruptions are affecting costs.

U.S. economists surveyed by The Wall Street Journal expect inflation to remain high well into next year, as bottlenecks across the supply chain increase prices and affect production.
—
Related video:

—
Other supermarket executives have said that they are receiving a fraction of what they order from suppliers and that they are sometimes sending their own trucks to grab goods from manufacturing plants. They say they are also placing and receiving orders earlier to avoid shortages.

“On any given day, something is out of stock,” Mr. Sankaran said, adding that Albertsons is offering alternatives to items that are running low.

Albertsons on Monday posted net sales and other revenue for the three months ended Sept. 11 of $16.51 billion, up 4.7% from the same period last year. That exceeded the $15.86 billion analysts polled by FactSet had expected.

The company, which runs hundreds of gas stations, said higher fuel prices helped boost overall sales. Oil prices have been climbing this year, with U.S. crude more than doubling since the end of last October.

Albertsons said it expects identical sales, which includes stores operating during the same period in both the current and prior fiscal years, to fall 2.5% to 3.5% for the year, compared with its previous guidance of a 5%-to-6% drop.

Executives said the company will invest more in the digital and in-store strategies it said helped sales in the latest quarter. In recent years, Albertsons has been working to grow its e-commerce business and improve its operations with a focus on selling more fresh foods. That strategy is helping its performance as consumers make more meals at home, the company said.

Shares are up about 3% Monday, and the stock is up more than 70% year to date.

The company also raised its quarterly dividend by 20% to 12 cents a share after taking into account its performance and free-cash-flow generation. The company said it would pay the next quarterly dividend of 12 cents a share on Nov. 12.
—
WSJ Writers Jaewon Kang and Dave Sebastian contributed to this report