- Identical Sales Growth: Sales rose 2.4%, with digital sales surging 21% year-over-year.
- Adjusted EBITDA Performance: Reported $1.039 billion, with updated 2025 guidance of $3.825–$3.875 billion.
- Loyalty Membership Expansion: Reached 49.8 million members, driving 2-3x higher spending for digitally engaged customers.
- Capital Allocation: $462 million invested in CAPEX, opening 2 stores, remodeling 23, and closing 16 underperforming locations.
- Pharmacy and Cost Savings Progress: Pharmacy business on track for accelerated growth, with $1.5 billion cost savings plan advanced via tech and automation.
Operational Highlights
The company continued to invest in its business, with $462 million in capital expenditures, opening two new stores, completing 23 remodels, and closing 16 underperforming locations. It also returned $77 million to shareholders through its quarterly dividend and continued its $750 million accelerated share repurchase program. The company's loyalty membership grew to 49.8 million, and its media collective delivered double-digit growth year-over-year.
Outlook and Guidance
The company updated its 2025 outlook, expecting identical sales to be 2.2% to 2.5%, adjusted EBITDA to be $3.825 billion to $3.875 billion, and adjusted EPS to be $2.08 to $2.16. For 2026, the company expects to face headwinds such as volume pressure within food and lower Medicare drug prices, but believes it can still deliver its algorithm driven by growth in digital platforms, merchandising intelligence, and customer experience.
Valuation and Growth Prospects
With a P/E Ratio of 9.84 and an EV/EBITDA of 7.6, the company's valuation appears reasonable. Analysts estimate next year's revenue growth at 0.5%. The company's ROIC is 5.67%, and ROE is 28.54%, indicating a decent return on investment. The Net Debt / EBITDA ratio is 4.81, which is relatively high. The Dividend Yield is 3.73%, providing a stable source of return for investors.
Digital and Pharmacy Growth
The company's digital sales grew 21%, with over half of orders delivered in under three hours. The pharmacy business saw an exceptionally strong quarter, driven by immunizations and value-added services. The company expects margin improvement as it scales adoption and embeds AI into its operations. The Inflation Reduction Act's Medicare drug price negotiation program is expected to have a near-neutral impact on profit.
Cost Savings and Productivity
The company has made progress on its $1.5 billion cost savings plan, driven by technology, automation, and analytics. It expects to continue to deliver cost savings in 2026, which will fuel reinvestment in growth and customer value. The company is pleased with the productivity flowing through to the bottom line, which is fueling growth through reinvestment in price and customer experience.