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Kroger (KR) Q3 Earnings Beat Estimates, Identical Sales Fall Y/Y
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The Kroger Co. (KR - Free Report) came up with third-quarter fiscal 2023 results, wherein both the top and bottom lines beat the Zacks Consensus Estimate. While net sales fell year over year, earnings improved from the year-ago period. Additionally, the company witnessed a decline in identical sales without fuel. Consequently, management revised its full-year forecast.
Kroger appears to be navigating a tough operating landscape, characterized by a tightening consumer spending environment. Also, the grocery industry is witnessing increased competition, with retailers actively working to reduce prices and expand their range of budget-friendly food options.
Despite these headwinds, Kroger's well-defined customer segmentation strategy, emphasis on value and focus on its 'Our Brands' portfolio have provided some cushion. The company remains committed to its core strengths, including an array of fresh products, personalized shopping experiences and a seamless digital ecosystem, all aimed at sustaining its momentum.
Analyzing Q3 Outcome
Kroger reported adjusted earnings of 95 cents a share, exceeding the Zacks Consensus Estimate of 90 cents and marking an increase from the 88 cents reported in the same quarter last year. Management emphasized that the strong performance in fuel and growth in alternative profit businesses played a pivotal role in driving earnings growth.
Total sales of $33,957 million came ahead of the Zacks Consensus Estimate of $33,890 million. However, the metric declined from the $34,198 million reported in the year-ago period. Excluding fuel, sales declined 0.5% from the year-ago period. We note that identical sales, without fuel, fell 0.6%, following 1% growth registered in the preceding quarter. Digital sales grew 11% during the quarter under discussion.
We note that the gross margin was 22% of sales. The FIFO gross margin rate, excluding fuel, expanded 3 basis points compared to the same period last year. The adjusted FIFO operating profit came in at $1,022 million, down from the $1,094 million reported in the year-ago period.
Kroger ended the quarter with cash of $254 million, total debt of $12,763 million and shareowners’ equity of $11,191 million. Net total debt decreased by $1,263 million over the last four quarters. Management continued to estimate capital expenditures in the band of $3.4-$3.6 billion and expects to generate adjusted free cash flow between $2.5 billion and $2.7 billion in fiscal 2023.
2023 View
Kroger now envisions identical sales, without fuel, to rise between 0.6% and 1% in the current fiscal, with underlying growth of 2.1% to 2.5% after adjusting for the effect of Express Scripts. This marks a shift from the earlier forecast of identical sales, excluding fuel, trending toward the lower end of a 1% to 2% increase.
Kroger anticipates the adjusted FIFO operating profit in the band of $4.9-$5 billion compared with $5.1 billion reported in fiscal 2022. The company anticipates fiscal 2023 adjusted earnings between $4.50 and $4.60 per share, suggesting an increase from adjusted earnings of $4.23 reported in fiscal 2022.
The company has previously guided adjusted FIFO operating profit in the range of $5-$5.2 billion and adjusted earnings between $4.45 and $4.60 per share.
Shares of this Zacks Rank #3 (Hold) company have fallen 5.9% in the past three months compared with the industry’s decline of 4.5%.
3 Stocks Looking Red Hot
Here, we have highlighted three better-ranked stocks, namely Target (TGT - Free Report) , The Kraft Heinz Company (KHC - Free Report) and Ollie's Bargain (OLLI - Free Report) .
The Zacks Consensus Estimate for Target’s current financial-year earnings suggests growth of 38.5% from the year-ago reported numbers. TGT has a trailing four-quarter earnings surprise of 30.8%, on average.
Kraft Heinz, which manufactures and markets food and beverage products, currently has a Zacks Rank #2. KHC has a trailing four-quarter earnings surprise of 9.9%, on average.
The Zacks Consensus Estimate for Kraft Heinz’s current financial-year sales and earnings suggests growth of 1.1% and 6.5%, respectively, from the year-ago reported numbers.
Ollie's Bargain, America’s largest retailer of closeout merchandise and excess inventory, currently carries a Zacks Rank #2. Ollie's Bargain has a trailing four-quarter earnings surprise of 1.3%, on average.
The Zacks Consensus Estimate for Ollie's Bargain’s current financial-year sales and earnings suggests growth of 14.3% and 68.5%, respectively, from the year-ago reported numbers.
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Kroger (KR) Q3 Earnings Beat Estimates, Identical Sales Fall Y/Y
The Kroger Co. (KR - Free Report) came up with third-quarter fiscal 2023 results, wherein both the top and bottom lines beat the Zacks Consensus Estimate. While net sales fell year over year, earnings improved from the year-ago period. Additionally, the company witnessed a decline in identical sales without fuel. Consequently, management revised its full-year forecast.
Kroger appears to be navigating a tough operating landscape, characterized by a tightening consumer spending environment. Also, the grocery industry is witnessing increased competition, with retailers actively working to reduce prices and expand their range of budget-friendly food options.
Despite these headwinds, Kroger's well-defined customer segmentation strategy, emphasis on value and focus on its 'Our Brands' portfolio have provided some cushion. The company remains committed to its core strengths, including an array of fresh products, personalized shopping experiences and a seamless digital ecosystem, all aimed at sustaining its momentum.
Analyzing Q3 Outcome
Kroger reported adjusted earnings of 95 cents a share, exceeding the Zacks Consensus Estimate of 90 cents and marking an increase from the 88 cents reported in the same quarter last year. Management emphasized that the strong performance in fuel and growth in alternative profit businesses played a pivotal role in driving earnings growth.
Total sales of $33,957 million came ahead of the Zacks Consensus Estimate of $33,890 million. However, the metric declined from the $34,198 million reported in the year-ago period. Excluding fuel, sales declined 0.5% from the year-ago period. We note that identical sales, without fuel, fell 0.6%, following 1% growth registered in the preceding quarter. Digital sales grew 11% during the quarter under discussion.
We note that the gross margin was 22% of sales. The FIFO gross margin rate, excluding fuel, expanded 3 basis points compared to the same period last year. The adjusted FIFO operating profit came in at $1,022 million, down from the $1,094 million reported in the year-ago period.
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 $254 million, total debt of $12,763 million and shareowners’ equity of $11,191 million. Net total debt decreased by $1,263 million over the last four quarters. Management continued to estimate capital expenditures in the band of $3.4-$3.6 billion and expects to generate adjusted free cash flow between $2.5 billion and $2.7 billion in fiscal 2023.
2023 View
Kroger now envisions identical sales, without fuel, to rise between 0.6% and 1% in the current fiscal, with underlying growth of 2.1% to 2.5% after adjusting for the effect of Express Scripts. This marks a shift from the earlier forecast of identical sales, excluding fuel, trending toward the lower end of a 1% to 2% increase.
Kroger anticipates the adjusted FIFO operating profit in the band of $4.9-$5 billion compared with $5.1 billion reported in fiscal 2022. The company anticipates fiscal 2023 adjusted earnings between $4.50 and $4.60 per share, suggesting an increase from adjusted earnings of $4.23 reported in fiscal 2022.
The company has previously guided adjusted FIFO operating profit in the range of $5-$5.2 billion and adjusted earnings between $4.45 and $4.60 per share.
Shares of this Zacks Rank #3 (Hold) company have fallen 5.9% in the past three months compared with the industry’s decline of 4.5%.
3 Stocks Looking Red Hot
Here, we have highlighted three better-ranked stocks, namely Target (TGT - Free Report) , The Kraft Heinz Company (KHC - Free Report) and Ollie's Bargain (OLLI - Free Report) .
Target, a general merchandise retailer, currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Target’s current financial-year earnings suggests growth of 38.5% from the year-ago reported numbers. TGT has a trailing four-quarter earnings surprise of 30.8%, on average.
Kraft Heinz, which manufactures and markets food and beverage products, currently has a Zacks Rank #2. KHC has a trailing four-quarter earnings surprise of 9.9%, on average.
The Zacks Consensus Estimate for Kraft Heinz’s current financial-year sales and earnings suggests growth of 1.1% and 6.5%, respectively, from the year-ago reported numbers.
Ollie's Bargain, America’s largest retailer of closeout merchandise and excess inventory, currently carries a Zacks Rank #2. Ollie's Bargain has a trailing four-quarter earnings surprise of 1.3%, on average.
The Zacks Consensus Estimate for Ollie's Bargain’s current financial-year sales and earnings suggests growth of 14.3% and 68.5%, respectively, from the year-ago reported numbers.