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Kroger (KR) Beats Q2 Earnings Estimates, Raises FY22 Outlook

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The Kroger Co. (KR - Free Report) came up with second-quarter fiscal 2022 results, wherein the top and the bottom lines not only surpassed the Zacks Consensus Estimate but also improved year over year. The company also registered growth in identical sales without fuel. Better execution and sustained demand for food at home resulted in a stronger-than-anticipated quarter. This prompted management to lift the fiscal 2022 guidance.

This Cincinnati, Ohio-based company has been making significant investments to enhance product freshness and quality and expand digital capabilities. Kroger has been introducing items under its “Our Brands” portfolio and launched 170 new items during the quarter under review.

Let’s Introspect

Kroger posted adjusted earnings of 90 cents a share, which surpassed the Zacks Consensus Estimate of 84 cents and increased from 80 cents reported in the prior-year quarter.

Total sales of $34,638 million came ahead of the Zacks Consensus Estimate of $34,414 million. Markedly, the metric rose from $31,682 million reported in the year-ago period. Excluding fuel, sales rose 5.2% from the year-ago period. We note that identical sales without fuel jumped 5.8%. Our Brands identical sales rose 10.2%, while digital sales grew 8%.

We note that the gross margin was 20.9% of sales. The FIFO gross margin rate, excluding fuel, expanded 2 basis points compared to the same period last year. The adjusted FIFO operating profit came in at $1,110 million, up from $947 million reported in the year-ago period.

The Kroger Co. Price, Consensus and EPS Surprise

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 $251 million, total debt of $13,277 million and shareowners’ equity of $9,639 million. Net total debt decreased by $878 million over the last four quarters. During the quarter, the company bought back $309 million shares. The company’s board of directors authorized a 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 $2.3 billion and $2.5 billion in fiscal 2022.

2022 View

Management now envisions identical sales without fuel to be up 4-4.5% in fiscal 2022 compared with the 0.2% growth registered in fiscal 2021. The company anticipates the FIFO operating profit in the band of $4.6-$4.7 billion compared with $4.3 billion reported in fiscal 2021.

Kroger now anticipates fiscal 2022 earnings between $3.95 and $4.05 per share, suggesting an increase from adjusted earnings of $3.68 reported in fiscal 2021.

The company had earlier guided identical sales without fuel in the bracket of 2.5-3.5% and FIFO operating profit in the range of $4.3-$4.4 billion for fiscal 2022. It had previously estimated earnings between $3.85 and $3.95 per share.

Shares of this Zacks Rank #2 (Buy) company have advanced 13.3% in the past year against the industry’s decline of 4.8%.

3 More Hot Stocks to Consider

Here we have highlighted three other top-ranked stocks, namely Dillard's (DDS - Free Report) , Ulta Beauty (ULTA - Free Report) and Arhaus (ARHS - Free Report) .

Dillard's, which operates retail department stores, sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of nearly 215%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Dillard's current financial-year sales suggests growth of nearly 4.8% from the year-ago period.

Ulta Beauty, which operates as a retailer of beauty products, sports a Zacks Rank #1. Ulta Beauty has a trailing four-quarter earnings surprise of 32.8%, on average. ULTA has an expected EPS growth rate of 11.9% for three to five years.

The Zacks Consensus Estimate for Ulta Beauty’s current financial-year sales suggests growth of 13.7% from the year-ago reported number.

Arhaus, which operates as a lifestyle brand and a premium retailer, currently carries a Zacks Rank #2. ARHS has an expected EPS growth rate of 14.3% for three to five years.

The Zacks Consensus Estimate for Arhaus’ current financial-year revenues and EPS suggests growth of 49.2% and 5.8%, respectively, from the year-ago reported figure. ARHS has a trailing four-quarter earnings surprise of 92%, on average.


In-Depth Zacks Research for the Tickers Above


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Dillard's, Inc. (DDS) - free report >>

The Kroger Co. (KR) - free report >>

Ulta Beauty Inc. (ULTA) - free report >>

Arhaus, Inc. (ARHS) - free report >>

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