Kroger Co (NYSE:KR) stock rose 1.53% (As on September 12, 11:26:48 AM UTC-4, Source: Google Finance) after the company reported second-quarter earnings that exceeded analyst expectations, driven by strong identical store sales growth and improved margins, prompting the grocery chain to raise its full-year outlook. Identical sales without fuel increased 3.4% YoY, significantly higher than the 1.2% growth recorded in the same period last year. The company’s gross margin improved to 22.5%, up from 22.1% in the same quarter last year, primarily due to the sale of Kroger Specialty Pharmacy, lower supply chain costs, and reduced shrink. The FIFO gross margin rate, excluding rent, depreciation and amortization, fuel and adjustment items increased 39 basis points compared to the same period last year. E-commerce sales grew 16% during the quarter, highlighting the company’s successful digital transformation efforts. The company is making strategic price investments, which led to another quarter of sequential improvement. In fact, since the beginning of the year, the company has lowered prices on more than 3,500 incremental products across the stores, which is improving the price spreads against the major competitors.
KR in the second quarter of FY 25 has reported the adjusted earnings per share of $1.04, beating the analysts’ estimates for the adjusted earnings per share of $0.99. The company had reported the adjusted revenue of $33.9 billion in the second quarter of FY 25, missing the analysts’ estimates for revenue of $34.05 billion.
Additionally, during the fourth quarter of Kroger’s fiscal 2024, Kroger entered into a $5 billion accelerated share repurchase program (ASR), which is expected to be completed in Kroger’s fiscal third quarter 2025. The ASR is being completed under Kroger’s $7.5 billion share repurchase authorization. After completion of the ASR program, Kroger expects to resume open market share repurchases under the remaining $2.5 billion authorization. Kroger expects to complete these open market share repurchases by the end of fiscal 2025, which is contemplated in full year guidance.
Kroger raised its full-year identical sales growth guidance to 2.7%-3.4%, up from the previous range of 2.25%-3.25%. The company also increased the lower end of its adjusted operating profit forecast to $4.8-$4.9 billion from $4.7-$4.9 billion previously, and now expects full-year adjusted EPS of $4.70-$4.80, compared to its earlier projection of $4.60-$4.80. The midpoint of the new EPS guidance range ($4.75) is slightly below the analyst consensus of $4.78.
Looking ahead, the company is focused on investments that will grow the core business. The first of these is new stores. KR is on track to deliver 30 major storing projects in 2025, and the company is accelerating new store projects with more efficient layouts and faster construction timelines. In 2026, the company expects to increase store openings by 30%, helping them grow both in-store and online sales faster.