Kroger Escapes Major Competition and Pressure With Earnings

June 21, 2018 by Jon C. Ogg

Source: Thinkstock
Kroger Co. (NYSE: KR) has managed to turn in a respectable earnings report, considering the pressure taking place in the grocery segment of retail. The grocery giant also raised the lower end of its annualized earnings per share guidance. This grocery landscape already had been challenged before Amazon acquired Whole Foods, and now there is much change taking place inside the grocery segment within retail as a whole.

Kroger’s earnings of $0.73 per share and sales of $37.5 billion were higher than the Thomson Reuters consensus estimates of $0.63 in earnings per share and $37.3 billion in revenues. Gross margin was 21.8% of sales for the first quarter.

Kroger also telegraphed annualized guidance of $2.00 to $2.15 per share for 2018. Thomson Reuters was calling for $2.07 per share. Its prior adjusted earnings guidance had been $1.95 to $2.15 per share. Kroger also has issued guidance of 2.0% to 2.5% growth for identical stores, excluding fuel.

After closing up 0.7% at $26.18 on Wednesday, Kroger shares were indicated up 8.1% at $28.34 Thursday morning. Its 52-week trading range is $19.69 to $31.45, and the Thomson Reuters consensus analyst target price ahead of the report was $27.93.

Chair and CEO Rodney McMullen said of the quarter:

Restock Kroger is off to a fantastic start. Everything we do supports our customers engaging seamlessly with Kroger. Kroger is creating the future of retail by innovating our core business and adding exciting partnerships like Ocado and our planned merger with Home Chef. We are on track to generate the free cash flow and incremental FIFO operating profit that we committed to in 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.