Albertsons Companies, Inc.

Corporate governance · Internal controls and risk management

We estimate the liabilities associated with the risks retained by us, in part, by considering historical claims experience, demographic and severity factors and other actuarial assumptions which, by their nature, are subject to a high degree of variability.

Reputation and brand · Esg environmental social governance performance

In addition, we could face increased regulatory, reputational and legal scrutiny as a result of our corporate social responsibility and sustainability related commitments and disclosures, and we could also face challenges with managing conflicting regulatory requirements and our various stakeholders' expectations.

Reputation and brand · Brand damage and negative publicity

Any failure, or perceived failure, to achieve our social responsibility and sustainability goals, commitments, and targets, or perceived lack of intensity of our commitment to these initiatives or to otherwise meet evolving and varied stakeholder expectations could damage our reputation and customer, investor and other stakeholder relationships.

Customer and revenue · Changing customer preferences and behavior

Failure to timely identify or respond to evolving consumer preferences, including changes in how customers use digital and AI-driven tools, could adversely affect our customer relationships, demand and market share. Because we face intense competition, our success depends, in part, on effectively anticipating evolving trends in demographics and responding to changing consumer preferences and demands.

Strategic execution · Merger acquisition and divestiture risks

We have evaluated in the past, and may evaluate in the future, certain strategic transactions with complementary businesses, services, or technologies as part of our overall growth strategy. These strategic transactions may involve significant risks, including but not limited to: the need for substantial financial investment; the diversion of management's attention and resources from our existing operations; challenges in integrating acquired businesses or realizing expected synergies.

Market position and competition · Pricing pressure and margin compression

An increasingly competitive industry and inflation and deflation in the prices of certain foods have made it difficult for food retailers to achieve positive identical sales growth on a consistent basis. Price investment by our competitors has also adversely affected our operating margins.

Economic and market conditions · Credit market conditions

Our operations and financial performance are affected by economic conditions such as macroeconomic factors, credit market conditions, tariffs and trade disruptions and the level of consumer confidence.

Natural and catastrophic events · Terrorism and security threats

Acts or threats, whether perceived or real, of war or terror or other criminal activity directed at the food and drug industry or the transportation industry, whether or not directly involving our stores, could increase our operating costs or impact general consumer behavior and consumer spending.

Economic and market conditions · Inflation and deflation pressures

Both inflation and deflation affect our business. Food deflation could reduce sales growth and earnings, while food inflation could reduce gross margin rates and consumer spending. We have observed increased inflation periods during the past several years with varying impacts on our business.

Social and demographic · Stakeholder activism and pressure

Any failure, or perceived failure, to achieve our social responsibility and sustainability goals, commitments, and targets, or perceived lack of intensity of our commitment to these initiatives or to otherwise meet evolving and varied stakeholder expectations could damage our reputation and customer, investor and other stakeholder relationships.

Economic and market conditions · Consumer spending and confidence

Consumers may reduce spending on non-essential items, purchase value-oriented products or increasingly rely on food discounters in an effort to secure the food and drug products that they need, all of which could impact our sales and profit.

Geopolitical and trade · Regulatory and policy uncertainty

Political, governmental, and regulatory regimes and practices can evolve as a result of elections or other events beyond our control. Such changes, including those which have and may occur under the new administration, are unpredictable and may have negative impacts on our business and operations.

Credit and liquidity · Access to capital and financing

We rely on access to bank and capital markets as sources of liquidity for cash requirements not satisfied by cash flows from operations. A downgrade in our credit ratings from the internationally recognized credit rating agencies could negatively affect our ability to access the bank and capital markets, especially in a time of uncertainty in either of those markets.

Capital structure and performance · Credit rating and cost of capital

A downgrade in our credit ratings from the internationally recognized credit rating agencies could negatively affect our ability to access the bank and capital markets, especially in a time of uncertainty in either of those markets. A rating downgrade could also impact our ability to grow our business by substantially increasing the cost of, or limiting access to, capital.

Market and investment · Market volatility and economic cycles

The price of our common stock is volatile and may be influenced by many factors, some of which are beyond our control, including: stock market volatility in response to macroeconomic and global events.

Legal and litigation · Litigation and legal proceedings

We are subject to, and may in the future be subject to, legal or other proceedings that could have a material adverse effect on us. In the course of conducting our business, arising in or outside of the ordinary course, we are and may become a party to various legal proceedings, including lawsuits related to the termination of the merger agreement with Kroger, class actions in matters involving personnel and employment issues, federal and state wage and hour laws, personal injury, antitrust claims based on both federal and state law, packaging or product claims, claims related to the sale of drug or pharmacy products, such as opioids.

Industry regulation · Regulatory compliance and changes

We operate our business within strict and complex regulatory environments, which includes laws and regulations involving antitrust and competition, privacy, data protection, environmental, healthcare, anti-bribery, anti-corruption, tax, accounting, financial reporting, health and sanitation standards, food labeling and safety, prescriptions, controlled substances, zoning, vehicle operations, fuel operations, equal employment opportunity, minimum wages and licensing for the sale of food, drugs, and alcoholic beverages.

Industry regulation · Licensing and permits

Each of our in-store pharmacies are enrolled in government healthcare programs and must be licensed by the respective state government. The licensing and enrollment requirements vary from state to state. An additional registration certificate must be granted by the U.S. Drug Enforcement Administration, and, in some states, a separate controlled substance license must be obtained to dispense controlled substances.

Legal and litigation · Product liability and warranty claims

Certain risks are inherent in providing pharmacy products and services, and our insurance may not be adequate to cover any claims against us. We currently operate 1,713 in-store pharmacies. As a result, we are exposed to risks inherent in the packaging, dispensing, billing, display, distribution and disposal of pharmaceuticals and other healthcare products, including risks of liability for products such as opioids.

Technology infrastructure · Cloud services and data center operations

These risks may be further exacerbated by the deployment and use of cloud-based enterprise solutions. In a cloud computing environment, we are subject to outages by third-party service providers and security breaches to their systems, which we may have little control over.