Albertsons fights to retain budget shoppers

Albertsons is trying to stop lower-income shoppers from switching to cheaper rivals like Walmart, Amazon, and Aldi, executives said during a recent earnings call. The company has identified this customer segment as particularly vulnerable to price-driven defections, especially as inflation continues to strain household budgets. These shoppers, who often prioritize cost over brand loyalty, have increasingly turned to discount retailers that offer consistently lower prices on staples like dairy, produce, and pantry items. Albertsons’ leadership acknowledged that this shift has not been uniform across all income brackets, with higher-income customers showing greater resilience in their spending habits.

Susan Morris, the company’s CEO, called those competitors the retailer’s “biggest leakage” and said Albertsons plans to use targeted price cuts and personalized deals to keep customers from leaving. The term refers to the gradual loss of shoppers to rivals, a trend that has accelerated as discount grocers expand their footprint and e-commerce platforms like Amazon offer convenience alongside competitive pricing. Morris emphasized that the company’s response would not involve blanket price reductions, which could erode profit margins without guaranteeing long-term customer retention. Instead, Albertsons aims to address specific pain points where price sensitivity is most acute, such as fresh food categories where consumers frequently compare costs.

Morris said the company won’t slash prices across the board. Instead, it will focus on “surgical and selective” reductions in key areas where shoppers make buying decisions—like fresh food, price perception, and convenience. Fresh food, which includes produce, meat, and dairy, is often the first category where budget-conscious shoppers evaluate a store’s affordability. Albertsons intends to adjust prices in these high-visibility sections to create the impression of better value without uniformly lowering costs on all items. The company also plans to enhance its digital and in-store promotions, tailoring deals to individual shopping habits through its loyalty program. This approach allows Albertsons to direct discounts toward customers most at risk of switching to competitors while avoiding unnecessary markdowns on products where price is less of a deciding factor.

The goal, she said, is to “maybe keep them from leaking as aggressively to some of the pure price players.” Albertsons will fund the cuts through “productivity” improvements. Morris did not detail specific measures but indicated the company would seek operational efficiencies to offset the financial impact of targeted price reductions.

Sharon McCollam, Albertsons’ president and CFO, said lower-income shoppers have been cutting back on higher-priced proteins and buying fewer items per trip. That shift helped drag the company’s comparable-store sales down nearly 1% last quarter. The reduction in basket sizes suggests that these customers are not only choosing cheaper alternatives but also purchasing fewer non-essential items, such as snacks or premium brands. McCollam noted that this behavior contrasts with higher-income shoppers, who have maintained more consistent spending patterns despite inflation. The divergence highlights the growing polarization in grocery shopping habits, where economic pressures are forcing lower-income households to make more deliberate choices about where and how they spend their money.

Weaker sales force a forecast cut

The decline among budget-conscious customers led Albertsons to lower its financial outlook for fiscal 2026. The company had expected flat or slightly positive sales growth but now expects a drop. The revised forecast shows the challenges Albertsons faces in retaining price-sensitive shoppers amid persistent inflation and the expansion of discount retailers.

Related: Albertsons May Attract New Buyer Soon

To adapt, Albertsons is consolidating its stores into fewer groups and centralizing its center store merchandising. The changes are part of a broader effort to make the company more flexible and reduce costs for shoppers. By reducing the number of store clusters, Albertsons can standardize pricing, promotions, and product assortments more efficiently. Centralizing center store merchandising—where dry goods, canned items, and household products are sold—could also lead to better inventory management and lower operational costs.

Morris said the retailer will also push suppliers to absorb upcoming cost increases rather than pass them on to customers. “We’re going to be pushing our vendor partners very hard to absorb those costs on their own,” she said. The company’s leadership has signaled that it will take a firm stance in these discussions, framing the effort as part of a shared responsibility to keep grocery prices stable.

Albertsons’ focus on lower-income shoppers comes as inflation continues to pressure household budgets. Many consumers have traded down to discount grocers or cut back on non-essentials, leaving traditional supermarkets scrambling to hold onto market share. The shift has been particularly pronounced in urban and suburban areas where multiple grocery options exist, giving shoppers more flexibility to switch stores based on price.

McCollam, who has served as president and CFO since mid-2021, plans to retire, the company announced. No replacement has been named. Her departure comes at a critical time for Albertsons, as the company handles a period of financial uncertainty and strategic realignment.

Morris said Albertsons will keep negotiating with suppliers to keep prices stable, even as it expects cost pressures to rise in the second half of the year. “We expect them to lean in,” she said.