Kroger Co (NYSE:KR) topline grows 3.8%

Kroger Co (NYSE:KR) stock fell 7.59% (As on June 17, 11:14:08 AM UTC-4, Source: Google Finance) though the company posted robust fiscal 2022 first-quarter sales after cycling pandemic-driven growth a year earlier, topping Wall Street’s earnings-per-share forecast and lifting its full-year outlook. Excluding $410 million in adjustments for investment losses and the Home Chef subsidiary, adjusted net earnings came in at $1.07 million versus $918 million in the prior-year period. Same-store sales of its private-label brands increased 6.3% in the quarter, as consumers snubbed branded juice and prepared meals for cheaper store-owned counterparts. Overall same-store sales excluding fuel increased 4.1%, slightly lagging estimates of 4.2%, due to weak sales of general merchandise such as apparel, home furnishings and toys.

KR in the first quarter of FY 22 has reported the adjusted earnings per share of $1.45, beating the analysts’ estimates for the adjusted earnings per share of $1.30. The company had reported the adjusted revenue growth of 3.8 percent to $44.6 billion in the first quarter of FY 22, beating the analysts’ estimates for revenue of $2.47 billion. After a 1% decline in gross margins to 21.6%, Kroger said it expects margins to remain under pressure this year as supply chain expenses and discounting offset the benefits from its plan to reduce $1 billion in costs through automation and technology. Gross margin was 21.6% of sales for the first quarter. The FIFO gross margin rate, excluding fuel, decreased 26 basis points compared to the same period last year. This decrease was primarily attributable to continued strategic price investments and higher supply chain costs offset by sourcing benefits and the cycling of a write-down related to a donation of personal protective equipment inventory from prior year.

Additionally, Kroger’s net total debt to adjusted EBITDA ratio is 1.68, compared to 1.79 a year ago. The company’s net total debt to adjusted EBITDA ratio target range is 2.30 to 2.50. During the quarter, Kroger repurchased $665 million shares and as of the end of the first quarter, $301 million remains on the board authorization announced on December 30, 2021.

Kroger lifted its 2022 forecast for earnings per share by 10 cents to between $3.85 and $3.95, above market estimates of $3.85, according to Refinitiv data.

The company forecast 2022 same-store sales growth between 2.5% and 3.5%, largely below expectations of 3.2%. The adjusted FIFO operating profit is expected to be in the range of $4.3 billion to $4.4 billion.

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