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Kroger's (KR) Q4 Earnings Top Estimates, Digital Sales Spike
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The Kroger Co. (KR - Free Report) came up with fourth-quarter fiscal 2020 results, wherein both the top and the bottom lines improved from the prior-year period. Notably, this was the fifth straight quarter of earnings beat. This Cincinnati, OH-based company has prioritized its actions to resonate well with the prevailing crisis and burgeoning demand for essential commodities. We note that the company’s digital business remains a key growth driver.
Chairman and CEO Rodney McMullen said, “We finished fiscal year 2020 with strong sales and earnings, as heightened demand for fresh, convenient food and meal solutions across modalities, including in store, pick up and home delivery, continued throughout the fourth quarter.”
Let’s Introspect
Kroger posted adjusted earnings of 81 cents a share that surpassed the Zacks Consensus Estimate of 69 cents and increased sharply from 57 cents reported in the prior-year quarter.
Total sales of $30,737 million fell short of the Zacks Consensus Estimate of $31,012 million. Nonetheless, the metric increased 6.4% year over year. Excluding fuel and dispositions, sales improved 10.7% from the year-ago period. The company’s digital sales surged 118%, while identical sales, without fuel, grew 10.6%.
We note that gross margin expanded 80 basis points to 22.9%. FIFO gross margin, excluding fuel, declined 6 basis points from the year-ago period. This reflects continued price investments, offset by sourcing efficiencies and growth in alternative profit streams. Adjusted FIFO operating profit came in at $837 million, up from $758 million reported in the prior-year quarter.
Kroger ended the quarter with cash of $371 million, total debt of $13,413 million, and shareowners’ equity of $9,550 million. Net total debt decreased by $1,973 million over the last four quarters.
During fiscal 2020, this Zacks Rank #3 (Hold) company returned $1.9 billion to shareholders. The company repurchased $1.32 billion of shares in the fiscal year.
2021 View
Notably, Kroger issued fiscal 2021 guidance, and signaled a decline in identical sales, without fuel. Analysts expect pandemic-induced demand to moderate, as vaccination drive gathers pace and consumers return to the old normal. The company expects identical sales, without fuel, to be down 3-5% in fiscal 2021. Markedly, identical sales without fuel grew 14.1% in fiscal 2020.
The company anticipates fiscal 2021 FIFO operating profit in the band $3.3-$3.5 billion. The company reported operating profit of $2.8 billion and adjusted FIFO operating profit of $4.1 billion in fiscal 2020.
Management now anticipates fiscal 2021 earnings between $2.75 and $2.95 per share. The Zacks Consensus Estimate for earnings for fiscal 2021 currently stands at $2.70, which is likely to witness an upward revision in the coming days. We note that the company reported adjusted earnings of $3.47 per share in fiscal 2020.
Management now envisions capital expenditures in the band of $3.4-$3.6 billion and expects to generate free cash flow between $1.6 billion and $1.8 billion in fiscal 2021.
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. The company has been focusing on plant-based products and eyeing technological expansion.
Shares of Kroger have advanced 8% in the past three months against the industry’s decline of 11.8%.
Target (TGT - Free Report) has a long-term earnings growth rate of 10.2% and a Zacks Rank #2.
Tapestry (TPR - Free Report) has a long-term earnings growth rate of 10% and a Zacks Rank #2 currently.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Kroger's (KR) Q4 Earnings Top Estimates, Digital Sales Spike
The Kroger Co. (KR - Free Report) came up with fourth-quarter fiscal 2020 results, wherein both the top and the bottom lines improved from the prior-year period. Notably, this was the fifth straight quarter of earnings beat. This Cincinnati, OH-based company has prioritized its actions to resonate well with the prevailing crisis and burgeoning demand for essential commodities. We note that the company’s digital business remains a key growth driver.
Chairman and CEO Rodney McMullen said, “We finished fiscal year 2020 with strong sales and earnings, as heightened demand for fresh, convenient food and meal solutions across modalities, including in store, pick up and home delivery, continued throughout the fourth quarter.”
Let’s Introspect
Kroger posted adjusted earnings of 81 cents a share that surpassed the Zacks Consensus Estimate of 69 cents and increased sharply from 57 cents reported in the prior-year quarter.
Total sales of $30,737 million fell short of the Zacks Consensus Estimate of $31,012 million. Nonetheless, the metric increased 6.4% year over year. Excluding fuel and dispositions, sales improved 10.7% from the year-ago period. The company’s digital sales surged 118%, while identical sales, without fuel, grew 10.6%.
We note that gross margin expanded 80 basis points to 22.9%. FIFO gross margin, excluding fuel, declined 6 basis points from the year-ago period. This reflects continued price investments, offset by sourcing efficiencies and growth in alternative profit streams. Adjusted FIFO operating profit came in at $837 million, up from $758 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 $371 million, total debt of $13,413 million, and shareowners’ equity of $9,550 million. Net total debt decreased by $1,973 million over the last four quarters.
During fiscal 2020, this Zacks Rank #3 (Hold) company returned $1.9 billion to shareholders. The company repurchased $1.32 billion of shares in the fiscal year.
2021 View
Notably, Kroger issued fiscal 2021 guidance, and signaled a decline in identical sales, without fuel. Analysts expect pandemic-induced demand to moderate, as vaccination drive gathers pace and consumers return to the old normal. The company expects identical sales, without fuel, to be down 3-5% in fiscal 2021. Markedly, identical sales without fuel grew 14.1% in fiscal 2020.
The company anticipates fiscal 2021 FIFO operating profit in the band $3.3-$3.5 billion. The company reported operating profit of $2.8 billion and adjusted FIFO operating profit of $4.1 billion in fiscal 2020.
Management now anticipates fiscal 2021 earnings between $2.75 and $2.95 per share. The Zacks Consensus Estimate for earnings for fiscal 2021 currently stands at $2.70, which is likely to witness an upward revision in the coming days. We note that the company reported adjusted earnings of $3.47 per share in fiscal 2020.
Management now envisions capital expenditures in the band of $3.4-$3.6 billion and expects to generate free cash flow between $1.6 billion and $1.8 billion in fiscal 2021.
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. The company has been focusing on plant-based products and eyeing technological expansion.
Shares of Kroger have advanced 8% in the past three months against the industry’s decline of 11.8%.
Stocks to Consider
Sprouts Farmers (SFM - Free Report) has a long-term earnings growth rate of 9.2%. Currently, it carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Target (TGT - Free Report) has a long-term earnings growth rate of 10.2% and a Zacks Rank #2.
Tapestry (TPR - Free Report) has a long-term earnings growth rate of 10% and a Zacks Rank #2 currently.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>