Monday, January 16, 2023

Today we want to return to our usual fare on the Calcbench blog, noodling over recent financial reports to find interesting pieces of data — and if you want noodles, why not start with supermarket giant Albertsons?

Albertsons (ACI) filed its most recent quarterly report last week. At a cursory glance, its numbers look underwhelming. Revenues rose 8.5 percent from the year-earlier quarter to $18.15 billion, but costs rose even faster, so net income actually fell 11.5 percent. Ouch.

Granted, inflation for supplies and labor has pressured many companies’ margins lately, even as those companies pass along at least some of their higher costs to keep top-line revenue growing. But that might not be the whole story here.

Figure 1, below, shows Albertsons’ most recent quarter compared to the year-earlier period.

Notice the line high-lighted in blue: the ever-popular “Other expense (income)” line. One year ago, Albertsons posted a gain of $38.3 million — which, because it appears on the expense section of the income statement, gets reported as a negative number. In this quarter, that line item was reported an expense of $1.7 million.  

Indeed, if you look just a few lines higher, you’ll see that Albertsons also reported a $7.3 million loss on disposition of… well, something; we’ll investigate exactly what shortly. But one year ago, that same line item was a $13.4 million gain.

Taken together, those two “other” items delivered a $51.7 million boost to Albertsons’ net income line one year ago. If you exclude those numbers, net income one year ago would have been $372.8 million, which would’ve been lower than what Albertsons just reported now.

So did Albertsons underperform this quarter? Or did it overperform one year ago thanks to some one-time items?

Finding the Details on Other Items

To learn more about exactly what these other gains and losses are, you can use our Interactive Disclosure page. Just call up the 10-Q for the relevant period, and most times other income is discussed in the Management Discussion & Analysis section.

For example, when you read the MD&A for Albertsons’ quarterly filing one year ago, you find this about that $13.4 million gain:

For the third quarter of fiscal 2021, net gain on property dispositions and impairment losses was $13.4 million, primarily driven by $15.8 million of gains from the sale of assets, partially offset by $2.4 million of asset impairments, primarily related to right-of-use assets.

That could mean the sale of some Albertsons properties, plus an impairment on the value of long-term operating leases (which are carried on the balance sheet as right-of-use assets).

Further down in the MD&A, Albertsons also says this about that $38.3 million in other income:

For the third quarter of fiscal 2021, Other income, net was $38.3 million compared to $19.2 million for the third quarter of fiscal 2020. Other income, net during the third quarter of fiscal 2021 was primarily driven by non-service cost components of net pension and post-retirement expense, unrealized gains from non-operating investments and income related to our equity investment.

We’ll be honest that we’re not sure what that disclosure means. Then again, that’s really the point here: Calcbench can help you find the data and disclosures you need to help you ask better questions — such as, “Albertsons, could you please translate that into plain English?”

That’s how you can be sure a company is giving you substantive answers, rather than leaving you standing in the baloney aisle.

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