Kroger Co (NYSE: KR) stock continues to face pressure

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Kroger Co (NYSE: KR) stock plunged 9.93% on September 13th, 2018 and continued its bearish momentum on September 14th, 2018 (As of 11:04 AM GMT-4; Source: Google finance) after the company reported another disappointing quarter, and analysts expect the competition will continue to weigh on the stock while Kroger reinvests in its business. Kroger’s net total debt to adjusted EBITDA ratio on a 52-week basis is 2.59. The net total debt to adjusted EBITDA ratio target range is 2.33 to 2.4. For the remainder of fiscal 2018, the company expect the leverage ratio to remain slightly above the target range, primarily due to increased borrowings to fund the company’s merger with Home Chef and investments in Ocado.

KR in the second quarter of FY 18 has reported the adjusted earnings per share of 41 cents. The company had reported the adjusted revenue growth of 1 percent to $27.87 billion in the second quarter of FY 18, missing the analysts’ estimates for revenue of $27.95 billion. KR has posted 1.6 percent same-store sales growth, short of analyst estimates of 1.9 percent growth. Kroger’s same-store sales miss comes in the same quarter that competitor Walmart (WMT) reported U.S. same-store sales growth of 4.5 percent, its best growth numbers in a decade. Meanwhile, KR has been investing heavily in its Restock Kroger initiative in an effort to keep pace with Walmart and Amazon.com (AMZN). Kroger reported a 50 percent increase in digital sales in the second quarter, but that growth has come at a cost of margin erosion. Second-quarter gross margin was 21.3 percent, down 0.36 from a year ago.

Moreover, the company is executing the digital strategy in growing the seamless coverage area which now reaches more than 80% of the company’s customers, up from 75% in the first quarter. This includes KR’s network of ClickList pickup locations, stores offering home delivery through Instacart and other partners, and shift to home capabilities such as the new Kroger Ship platform. Kroger Ship got launched in four markets in August. Cincinnati, Houston, Louisville and Nashville. The company have since launched in Atlanta and anticipate rolling out the service to additional markets over the next few months.

KR has raised its full-year EPS guidance from a previous range of between $3.64 and $3.79 to a new range of between $3.88 and $4.03. Kroger reiterated its previous full-year same-store sales growth guidance of between 2.0 percent and 2.5 percent.

 

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