Kroger Co. Q1 2024 Results Beat Expectations with $1.43 Adjusted EPS
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Kroger Co. Q1 2024 Results Beat Expectations with $1.43 Adjusted EPS

Kroger Co. reported its first-quarter 2024 results, with total company sales reaching $45.3 billion and an operating profit of $1,294 million.
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The Kroger Co. (NYSE: KR) reported its first-quarter 2024 results, showcasing a mixed performance. Total company sales for the quarter reached $45.3 billion, a slight increase from $45.2 billion in the same period last year. Identical sales, excluding fuel, rose by 0.5%, illustrating modest growth in core business areas.

The company also reported an operating profit of $1,294 million, down from $1,470 million in the first quarter of 2023. Earnings per share (EPS) stood at $1.29, slightly lower than the $1.32 reported in the previous year.

Kroger’s digital sales grew by more than 8%, with delivery and pickup services combining for double-digit growth. The company also noted an increase in total households, loyal households, and customer visits, indicating a solid customer base. However, the FIFO gross margin rate decreased by 7 basis points, primarily due to lower pharmacy margins and increased price investments, partially offset by a favorable product mix reflecting Our Brands’ margin performance.

The company’s LIFO charge for the quarter was $41 million, a decrease from $99 million in the same period last year. This reduction was attributed to lower inflation expectations for the current year. Despite these challenges, Kroger’s commitment to providing exceptional customer value and investing in associates has helped maintain a stable performance.

Kroger’s $1.43 Adjusted EPS Beats Wall Street Estimates

Kroger’s first-quarter performance fell short of Wall Street expectations. Analysts had anticipated an EPS of $1.34, but the company reported an EPS of $1.29. Despite this, Kroger’s adjusted EPS, which excludes certain items, was $1.43, surpassing the expected $1.34. This adjusted figure indicates that the company’s core operations performed better than the headline numbers suggest.

Revenue expectations for the quarter were set at $44.93 billion, and Kroger managed to exceed this with actual revenues of $45.3 billion. This slight outperformance in revenue indicates that, despite various headwinds, the company’s sales strategies are effective. The increase in digital sales and customer visits further supports this positive trend.

However, the operating profit declined, with the first quarter of 2024 reporting $1,294 million compared to $1,470 million in the first quarter of 2023. This drop in operating profit is a concern, reflecting increased operating expenses and investments in associate wages and incentive plans. The OG&A rate increased by 22 basis points, highlighting the cost pressures the company is facing.

Kroger Reaffirms Full-Year 2024 Guidance, Expects Net Earnings per Diluted Share Between $4.30 and $4.50

Kroger reaffirmed its full-year 2024 guidance, projecting identical sales growth, excluding fuel, between 0.25% and 1.75%. The company expects adjusted FIFO operating profit to range between $4.6 billion and $4.8 billion. Adjusted net earnings per diluted share are forecasted to be between $4.30 and $4.50. These projections indicate cautious optimism, with the company expecting steady growth despite economic uncertainties.

The company also anticipates generating adjusted free cash flow of $2.5 billion to $2.7 billion and capital expenditures of $3.4 billion to $3.6 billion. These figures suggest a strong commitment to reinvesting in the business to drive long-term growth. The adjusted effective tax rate is expected to be around 23%, reflecting typical tax adjustments.

Kroger’s capital allocation strategy focuses on generating strong free cash flow and maintaining its investment-grade debt rating. The company has paused its share repurchase program to prioritize de-leveraging following the proposed merger with Albertsons.

Disclaimer: The author does not hold or have a position in any securities discussed in the article.