Kroger Earnings Beat Fails To Impress Investors; Stocks Tumbles 3%

kroger earnings

Kroger Co (NYSE: KR) reported its first quarter 2019 results before the opening bell today (Thursday). Higher operating costs and expenses coupled with a decline in the gain on sale of its convenience store business unit, triggered a 62% decline in profit in the three months ended May 25, 2019.

The grocery store chain, however, managed to beat expectations on both top and bottom lines. Kroger has been ramping up efforts to transform its operations in order to cope with stiff competition from other retailers such as Walmart Inc (NYSE: WMT) and Target Corp (NYSE: TGT).

Cincinnati-based Kroger also confirmed its earnings and identical sales forecast for fiscal 2019. Shares of the company slipped 3.5% to change hands at $22.80 apiece in premarket trading. The stock has dropped about 9% in the past 12 months and more than 15% this year.

KR Earnings & Outlook

Kroger had net income $772 million, or $0.95 per share, compared with $2.03 billion, or $2.37 per share. Adjusted for items, earnings came to $0.72 per share in the quarter. Analysts had been expecting adjusted earnings of $0.71 per share, according to FactSet data.

Companywide revenue, Kroger said, was $37.25 billion in the first quarter, down from $37.72 billion from the year-ago period. The company attributed the decline to the sale of its convenience store business unit. On average, analysts surveyed by FactSet expected Kroger to post revenue of $37.21 billion.

Digital sales and identical sales grew 42% and 1.5%, respectively. For the full year, Kroger forecasts adjusted earnings of between $2.15 and $2.25 per share and identical sales growth of 2.00% to 2.25%.

Kroger CEO Comments

“Because the retail industry is constantly transforming, we proactively launched Restock Kroger to deliver for our customers and shareholders. It all starts with our customer obsession, which is why Kroger is assembling a platform to deliver anything, anytime, anywhere. We are building momentum in the second year of Restock Kroger, which is off to a solid start,” commented Kroger CEO Rodney McMullen

“We are on track to generate the free cash flow and incremental adjusted FIFO operating profit that we committed to in 2019 as part of Restock Kroger. We are confident in our ability to deliver on our plans for the year and our long-term vision to serve America through food inspiration and uplift,” McMullen added.

Kroger Company Profile

Kroger is the leading American grocer, with 2,764 supermarkets operating under several banners throughout the country as of the end of fiscal 2018. Around 82% of stores have pharmacies, while over half also sell fuel.

The company also operated 274 fine jewelry stores at the end of fiscal 2017. Kroger features a leading private-label offering and manufactures around a third of its own-brand units (and 43% of its grocery own-label assortment) itself, in 37 food production plants nationwide.

Kroger is a top-two grocer in 46 of the 52 major markets in which it operates along with 54 of its 73 secondary markets (as of the end of fiscal 2017, according to IRI data). Virtually all of Kroger’s sales come from the United States.