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The Kroger Co. (KR - Free Report) came up with first-quarter fiscal 2021 results, wherein both the top and the bottom lines surpassed the Zacks Consensus Estimate. Management highlighted that identical sales results exceeded initial expectations. We note that the company’s digital business remains a key growth driver.
This Cincinnati, OH-based company has been making significant investments to enhance product freshness and quality, and expand digital capabilities. Impressively, Kroger has been introducing new items under its “Our Brands” portfolio — launched 253 new items during the quarter under review. Cumulatively, these have aided the company’s performance prompting management to raise fiscal 2021 guidance.
Chairman and CEO Rodney McMullen said, “We were disciplined in driving costs out of the business and we achieved record growth in Kroger's alternative profit business, demonstrating the power and attractiveness of our long-term model.”
Let’s Introspect
Kroger posted adjusted earnings of $1.19 per share that surpassed the Zacks Consensus Estimate of 99 cents but decreased from $1.22 reported in the prior-year quarter.
Total sales of $41,298 million outpaced the Zacks Consensus Estimate of $39,222 million. However, the metric declined marginally 0.6% year over year. Excluding fuel, sales dropped 4% from the year-ago period. The company’s digital sales increased 16%, while identical sales, without fuel, fell 4.1%.
We note that gross margin contracted 170 basis points to 22.6%. FIFO gross margin, excluding fuel, declined 65 basis points from the year-ago period. This decrease reflects sales deleverage, higher shrink, continued price investments, and charges related to COVID-19, partly offset by sourcing benefits and growth in Alternative Profits. Adjusted FIFO operating profit came in at $1,375 million, down from $1,453 million reported in the prior-year quarter.
Kroger ended the quarter with cash of $360 million, total debt of $14,124 million, and shareowners’ equity of $9,229 million. Net total debt increased by $1,005 million over the last four quarters. The company’s board of directors approved new $1 billion share buyback program.
Management estimates capital expenditures in the band of $3.4-$3.6 billion and expects to generate free cash flow between $1.8 billion and $2 billion in fiscal 2021.
Fiscal 2021 View
Management now envisions identical sales, without fuel, to be down 2.5-4% in fiscal 2021. The company had previously expected a decline of 3-5% in the metric. The company anticipates FIFO operating profit in the band $3.5-$3.7 billion, up from prior projection of $3.3-$3.5 billion.
Management now anticipates fiscal 2021 earnings between $2.95 and $3.10 per share. The Zacks Consensus Estimate for earnings for the fiscal year currently stands at $2.83, which is likely to witness an upward revision in the coming days. The company had earlier forecast earnings in the range of $2.75 and $2.95 per share.
Wrapping Up
Kroger, which operates in the thin-margin grocery industry, has been making every effort to strengthen position not only with respect to products but also in terms of the way consumers prefer shopping. Realizing the need of the hour, the company has been offering a no-contact delivery option, low-contact pickup service and ship-to-home orders. It expanded to 2,233 Pickup locations and 2,488 Delivery locations.
Shares of this Zacks Rank #3 (Hold) company have advanced 9.1% in the past three months compared with the industry’s rise of 6.1%.
Walmart (WMT - Free Report) has a trailing four-quarter earnings surprise of 17.8%, on average. The stock carries a Zacks Rank #2 (Buy).
Costco (COST - Free Report) has a long-term earnings growth rate of 9.1% and a Zacks Rank #2 currently.
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Kroger (KR) Beats on Q1 Earnings & Sales, Lifts FY21 Guidance
The Kroger Co. (KR - Free Report) came up with first-quarter fiscal 2021 results, wherein both the top and the bottom lines surpassed the Zacks Consensus Estimate. Management highlighted that identical sales results exceeded initial expectations. We note that the company’s digital business remains a key growth driver.
This Cincinnati, OH-based company has been making significant investments to enhance product freshness and quality, and expand digital capabilities. Impressively, Kroger has been introducing new items under its “Our Brands” portfolio — launched 253 new items during the quarter under review. Cumulatively, these have aided the company’s performance prompting management to raise fiscal 2021 guidance.
Chairman and CEO Rodney McMullen said, “We were disciplined in driving costs out of the business and we achieved record growth in Kroger's alternative profit business, demonstrating the power and attractiveness of our long-term model.”
Let’s Introspect
Kroger posted adjusted earnings of $1.19 per share that surpassed the Zacks Consensus Estimate of 99 cents but decreased from $1.22 reported in the prior-year quarter.
Total sales of $41,298 million outpaced the Zacks Consensus Estimate of $39,222 million. However, the metric declined marginally 0.6% year over year. Excluding fuel, sales dropped 4% from the year-ago period. The company’s digital sales increased 16%, while identical sales, without fuel, fell 4.1%.
We note that gross margin contracted 170 basis points to 22.6%. FIFO gross margin, excluding fuel, declined 65 basis points from the year-ago period. This decrease reflects sales deleverage, higher shrink, continued price investments, and charges related to COVID-19, partly offset by sourcing benefits and growth in Alternative Profits. Adjusted FIFO operating profit came in at $1,375 million, down from $1,453 million reported in the prior-year quarter.
The Kroger Co. Price, Consensus and EPS Surprise
The Kroger Co. price-consensus-eps-surprise-chart | The Kroger Co. Quote
Other Financial Aspects
Kroger ended the quarter with cash of $360 million, total debt of $14,124 million, and shareowners’ equity of $9,229 million. Net total debt increased by $1,005 million over the last four quarters. The company’s board of directors approved new $1 billion share buyback program.
Management estimates capital expenditures in the band of $3.4-$3.6 billion and expects to generate free cash flow between $1.8 billion and $2 billion in fiscal 2021.
Fiscal 2021 View
Management now envisions identical sales, without fuel, to be down 2.5-4% in fiscal 2021. The company had previously expected a decline of 3-5% in the metric. The company anticipates FIFO operating profit in the band $3.5-$3.7 billion, up from prior projection of $3.3-$3.5 billion.
Management now anticipates fiscal 2021 earnings between $2.95 and $3.10 per share. The Zacks Consensus Estimate for earnings for the fiscal year currently stands at $2.83, which is likely to witness an upward revision in the coming days. The company had earlier forecast earnings in the range of $2.75 and $2.95 per share.
Wrapping Up
Kroger, which operates in the thin-margin grocery industry, has been making every effort to strengthen position not only with respect to products but also in terms of the way consumers prefer shopping. Realizing the need of the hour, the company has been offering a no-contact delivery option, low-contact pickup service and ship-to-home orders. It expanded to 2,233 Pickup locations and 2,488 Delivery locations.
Shares of this Zacks Rank #3 (Hold) company have advanced 9.1% in the past three months compared with the industry’s rise of 6.1%.
Stocks to Consider
Target (TGT - Free Report) has a long-term earnings growth rate of 13.3% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Walmart (WMT - Free Report) has a trailing four-quarter earnings surprise of 17.8%, on average. The stock carries a Zacks Rank #2 (Buy).
Costco (COST - Free Report) has a long-term earnings growth rate of 9.1% and a Zacks Rank #2 currently.
Time to Invest in Legal Marijuana
If you’re looking for big gains, there couldn’t be a better time to get in on a young industry primed to skyrocket from $17.7 billion back in 2019 to an expected $73.6 billion by 2027.
After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could be a still greater bonanza for investors. Even before the latest wave of legalization, Zacks Investment Research has recommended pot stocks that have shot up as high as +285.9%.
You’re invited to check out Zacks’ Marijuana Moneymakers: An Investor’s Guide. It features a timely Watch List of pot stocks and ETFs with exceptional growth potential.
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