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Kroger Q1 Earnings Miss Despite Revenue Beat & E-commerce Growth
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Key Takeaways
Kroger's Q1 earnings missed estimates, while sales rose 2.2% and topped expectations.
Adjusted e-commerce sales grew 19%, led by delivery and convenience orders under an hour.
Kroger reaffirmed fiscal 2026 guidance for identical sales growth, profits and free cash flow.
The Kroger Co. (KR - Free Report) reported first-quarter fiscal 2026 adjusted earnings of $1.58 per share, which missed the Zacks Consensus Estimate of $1.59 by 0.63%. The bottom line improved 6% from $1.49 reported in the year-ago quarter.
Total sales of $46,121 million increased 2.2% year over year and beat the consensus mark of $45,524 million by 1.31%. The quarter benefited from solid e-commerce gains, continued strength in Our Brands and higher customer traffic, though cost pressures and price investments weighed on margins.
Kroger’s identical sales, excluding fuel and adjustment items, increased 1% year over year. This included an unfavorable 130-basis-point impact from the Inflation Reduction Act.
Excluding fuel and Vitacost, sales rose 0.5% from the year-ago period. Management noted that grocery sales represented a larger portion of the overall mix, pointing to improving trends in the company’s core business.
Kroger's Digital Business Shows Strength
Adjusted e-commerce sales grew 19% year over year, led by delivery. Convenience orders delivered in under an hour represented approximately 50% of digital growth.
The company also achieved profitability in e-commerce, including media, for the first time. Management attributed the improvement to store-based fulfillment, reduced the cost to serve and continued scaling of its hybrid fulfillment model.
KR's Brands and Pharmacy Support Growth
Our Brands gained share and outpaced national brands by 175 basis points. The performance was driven by innovation in Private Selection and momentum in Simple Truth.
Pharmacy delivered profit growth despite top-line pressure. The business was supported by core script growth, GLP-1 demand and an accelerating shift from branded to generic medications, which hurt sales but aided profitability.
Kroger's Margins Face Cost Headwinds
Gross margin was 22.7% of sales compared with 23% in the prior-year quarter. The decline stemmed from a higher fuel sales mix, higher transportation costs, egg deflation and planned price investments.
FIFO gross margin rate, excluding rent, depreciation and amortization, fuel and adjustment items, declined 9 basis points. Transportation costs created a 15-basis-point headwind, as higher oil prices increased fuel-related logistics costs.
KR's Operating Profit Edges Higher
Operating profit came in at $1,407 million compared with $1,322 million in the year-ago quarter. Adjusted FIFO operating profit was $1,544 million, up from $1,518 million.
The operating, general and administrative rate, excluding fuel and adjustment items, rose 16 basis points. The increase reflected planned investments in associate wages, store hours, training and uniforms, partly offset by productivity initiatives and the lapping of higher multi-employer pension contributions.
Kroger's Cash Flow and Debt Position
Kroger generated $1,774 million in net cash provided by operating activities in the quarter compared with $2,149 million in the prior-year period. Capital investments, excluding lease buyouts, totaled $1,450 million.
The company ended the quarter with cash and temporary cash investments of $2,873 million. Total debt was $16,995 million, while net total debt to adjusted EBITDA was 1.75, below the company’s target range of 2.30-2.50.
Image Source: Zacks Investment Research
KR's Guidance Remains Intact
Kroger reaffirmed its fiscal 2026 outlook. The company expects identical sales without fuel to grow 1-2%, including about 130 basis points of unfavorable impact from the Inflation Reduction Act.
The company continues to expect FIFO operating profit of $5-$5.2 billion and adjusted earnings of $5.10-$5.30 per share. Free cash flow is projected at $2.7-$2.9 billion, while capital expenditures are expected to be $3.8-$4 billion.
Shares of this Zacks Rank #3 (Hold) company have declined 21.3% over the past year compared to the industry’s growth of 20.3%.
The consensus estimate for Ross Stores’ current fiscal-year sales and earnings implies growth of 9.1% and 17.1%, respectively, from the year-ago reported figures. ROST delivered a trailing four-quarter earnings surprise of 10.2%, on average.
Casey's General Stores, Inc. (CASY - Free Report) is one of the leading convenience store chains in the United States. CASY currently sports a Zacks Rank #1.
The Zacks Consensus Estimate for Casey's current fiscal-year sales and earnings calls for growth of 17.8% and 9.1%, respectively, from the year-ago reported figures. CASY delivered a trailing four-quarter earnings surprise of 18.4%, on average.
The Chef's Warehouse, Inc. (CHEF - Free Report) , a specialty food distributor serving restaurants, hotels and hospitality customers, sports a Zacks Rank #1 at present.
The Zacks Consensus Estimate for The Chef's Warehouse’s current financial-year sales and earnings indicates growth of 8.3% and 24.7%, respectively, from the prior-year reported levels. CHEF delivered a trailing four-quarter earnings surprise of 28.9%, on average.
View the Zacks #1 Rank List
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Kroger Q1 Earnings Miss Despite Revenue Beat & E-commerce Growth
Key Takeaways
The Kroger Co. (KR - Free Report) reported first-quarter fiscal 2026 adjusted earnings of $1.58 per share, which missed the Zacks Consensus Estimate of $1.59 by 0.63%. The bottom line improved 6% from $1.49 reported in the year-ago quarter.
Total sales of $46,121 million increased 2.2% year over year and beat the consensus mark of $45,524 million by 1.31%. The quarter benefited from solid e-commerce gains, continued strength in Our Brands and higher customer traffic, though cost pressures and price investments weighed on margins.
The Kroger Co. Price, Consensus and EPS Surprise
The Kroger Co. price-consensus-eps-surprise-chart | The Kroger Co. Quote
KR's Sales Reflect Grocery Momentum
Kroger’s identical sales, excluding fuel and adjustment items, increased 1% year over year. This included an unfavorable 130-basis-point impact from the Inflation Reduction Act.
Excluding fuel and Vitacost, sales rose 0.5% from the year-ago period. Management noted that grocery sales represented a larger portion of the overall mix, pointing to improving trends in the company’s core business.
Kroger's Digital Business Shows Strength
Adjusted e-commerce sales grew 19% year over year, led by delivery. Convenience orders delivered in under an hour represented approximately 50% of digital growth.
The company also achieved profitability in e-commerce, including media, for the first time. Management attributed the improvement to store-based fulfillment, reduced the cost to serve and continued scaling of its hybrid fulfillment model.
KR's Brands and Pharmacy Support Growth
Our Brands gained share and outpaced national brands by 175 basis points. The performance was driven by innovation in Private Selection and momentum in Simple Truth.
Pharmacy delivered profit growth despite top-line pressure. The business was supported by core script growth, GLP-1 demand and an accelerating shift from branded to generic medications, which hurt sales but aided profitability.
Kroger's Margins Face Cost Headwinds
Gross margin was 22.7% of sales compared with 23% in the prior-year quarter. The decline stemmed from a higher fuel sales mix, higher transportation costs, egg deflation and planned price investments.
FIFO gross margin rate, excluding rent, depreciation and amortization, fuel and adjustment items, declined 9 basis points. Transportation costs created a 15-basis-point headwind, as higher oil prices increased fuel-related logistics costs.
KR's Operating Profit Edges Higher
Operating profit came in at $1,407 million compared with $1,322 million in the year-ago quarter. Adjusted FIFO operating profit was $1,544 million, up from $1,518 million.
The operating, general and administrative rate, excluding fuel and adjustment items, rose 16 basis points. The increase reflected planned investments in associate wages, store hours, training and uniforms, partly offset by productivity initiatives and the lapping of higher multi-employer pension contributions.
Kroger's Cash Flow and Debt Position
Kroger generated $1,774 million in net cash provided by operating activities in the quarter compared with $2,149 million in the prior-year period. Capital investments, excluding lease buyouts, totaled $1,450 million.
The company ended the quarter with cash and temporary cash investments of $2,873 million. Total debt was $16,995 million, while net total debt to adjusted EBITDA was 1.75, below the company’s target range of 2.30-2.50.
Image Source: Zacks Investment Research
KR's Guidance Remains Intact
Kroger reaffirmed its fiscal 2026 outlook. The company expects identical sales without fuel to grow 1-2%, including about 130 basis points of unfavorable impact from the Inflation Reduction Act.
The company continues to expect FIFO operating profit of $5-$5.2 billion and adjusted earnings of $5.10-$5.30 per share. Free cash flow is projected at $2.7-$2.9 billion, while capital expenditures are expected to be $3.8-$4 billion.
Shares of this Zacks Rank #3 (Hold) company have declined 21.3% over the past year compared to the industry’s growth of 20.3%.
Picks You Can’t Miss Out On
Ross Stores, Inc. (ROST - Free Report) is one of the largest off-price apparel and home fashion chains in the United States. ROST sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for Ross Stores’ current fiscal-year sales and earnings implies growth of 9.1% and 17.1%, respectively, from the year-ago reported figures. ROST delivered a trailing four-quarter earnings surprise of 10.2%, on average.
Casey's General Stores, Inc. (CASY - Free Report) is one of the leading convenience store chains in the United States. CASY currently sports a Zacks Rank #1.
The Zacks Consensus Estimate for Casey's current fiscal-year sales and earnings calls for growth of 17.8% and 9.1%, respectively, from the year-ago reported figures. CASY delivered a trailing four-quarter earnings surprise of 18.4%, on average.
The Chef's Warehouse, Inc. (CHEF - Free Report) , a specialty food distributor serving restaurants, hotels and hospitality customers, sports a Zacks Rank #1 at present.
The Zacks Consensus Estimate for The Chef's Warehouse’s current financial-year sales and earnings indicates growth of 8.3% and 24.7%, respectively, from the prior-year reported levels. CHEF delivered a trailing four-quarter earnings surprise of 28.9%, on average.