Kroger Co (NYSE:KR) stock fell 0.13% (As on March 19, 11:41:04 AM UTC-4, Source: Google Finance) after the company reported strong quarterly results and forecast annual profit above Wall Street estimates, as the U.S. grocer bets on higher food prices and embarks on cost-cutting measures across its digital business and supply chain. Kroger has been streamlining its supply chain to limit costs, from sourcing products closer to its distribution centers to cutting expenses tied to digital orders through automation by partnering with British online supermarket Ocado Group. Meanwhile, the proposed $24.6 billion acquisition of Albertsons Cos Inc is under pressure from some U.S. lawmakers and consumer advocacy groups, but Kroger said it was on track to seal the deal in early 2024. Adjusted free cash flow for the year came in $800 million lower than anticipated. This was entirely due to movements in working capital towards the end of the year.

KR in the fourth quarter of FY 22 has reported the adjusted earnings per share of 99 cents, beating the analysts’ estimates for the adjusted earnings per share of 90 cents. The company had reported the adjusted revenue of $34.82 billion in the fourth quarter of FY 22, missing the analysts’ estimates for revenue of $34.89 billion. The company saw continued momentum in the identical sales without fuel of 6.2%. Underlying growth would have been 6.7% after adjusting for the effect of Express Scripts. The Brands contributed another strong quarter with identical sales of 10.1%, reflecting the growing importance to customers, I think is exclusive to Kroger products. Digital sales also accelerated during the quarter of 12%, led by 22% growth in delivery solutions. Kroger’s FIFO gross margin rate excluding fuel decreased 1 basis point and the OG&A rate excluding fuel and adjustment items decreased 56 basis points. The average retail price of fuel was $3.39 compared to $3.30 in the same quarter last year. Our cents per gallon fuel margin was $0.51 compared to $0.44 in the same quarter last year. Adjusted FIFO operating profit was $1.27 billion, a year-over-year increase of 26%.

The company forecast adjusted per-share earnings between $4.45 and $4.60 for fiscal 2023, above Refinitiv estimates of $4.20. Still, Kroger projected same-store sales growth below expectations for 2023, as it expects food inflation to ease in the back half of the year. The supermarket chain forecast same-store sales growth, excluding fuel, of 1% to 2% in fiscal 2023, while analysts expected an average increase of 2.23%, according to data from Refinitiv IBES.