Kroger rips 7% gain after profit guidance blows past expectations

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Kroger (NYSE:KR) opened trading on Thursday up 6.85% after posting a mixed Q4 earnings report, but setting profit guidance way ahead of expectations.

The grocery store operator reported identical sales (ex-fuel) were up 6.2% for the quarter to top the consensus expectation of +5.2%.

Gross margin came in at 21.8% of sales for the quarter. The FIFO gross margin rate (ex-fuel) decreased 1 basis point compared to the same period last year. The Cincinnati-based company said the result reflected Kroger's (KR) ability to effectively manage higher product cost inflation through strong sourcing practices and lower supply chain costs, while maintaining competitive pricing and helping customers manage their budgets.

On the capital allocation front, Kroger (KR) expects to continue to pay its quarterly dividend and expects the payout to increase over time, subject to board approval. Of note, Kroger (KR) has paused its share repurchase program to prioritize de-leveraging following the proposed merger with Albertsons Companies (ACI).

Looking ahead, Kroger (KR) sees full-year identical-store sales growth of +1% to +2% vs. +2.6% consensus and adjusted EPS of $4.45 to $4.60 vs. $4.17 consensus. Full-year capex spending of $3.4B to $3.6B is anticipated vs. $3.6B consensus.

Kroger (KR) said it is still targeting an Albertsons (ACI) merger closing date of early 2024.

Read more details from the Kroger Q4 earnings report.

Comments

[Just Some Guy]

Looks like Mister Market has reviewed that opening spike upwards and decided to tone it down to 3% at this moment, and could even close red.

[David RG]

@Just Some Guy Not really. Up 5.5% at the close.

[Just Some Guy]

@David RG yes it did, closed above the Bollinger band, usually indicates further upward momentum over the next week or so, but I wouldn't expect much more than that.

[Ultra_BigBuxs99]

I hate shopping at Krogers, hey you want the better price, well….ya gotta buy 5 or MORE (used to be 3, and before that 2) what’s next buy 6, 7, 10 !
Krogers suxs.

[Just Some Guy]

@UltraMAGA_BigBUX or use their digital coupons. And now they're doing mix-and-match to $40 for an unspecified discount.

OTOH some of those "buy 5" discounts are substantial.

[Wellington999]

@UltraMAGA_BigBUX The difference is the gas stations, Ralphs here in cali...similar to Costco without the hour wait...

[Ultra_BigBuxs99]

@Just Some Guy that’s true, but you still gotta know your prices.

[Just Some Guy]

Full-year identical store guidance is less than inflation, that's negative for investors. EPS results and guidance are reasonable. Metrics may be worse if you project the Albertson's merger.

[b_lookingglass]

@Just Some Guy The overall same store sales is somewhat muted by shifts from national name brands to Kroger's owned brands (up 10.1
%). Why pay for Stove Top at 2.99 when the Kroger brand $1.49 version works just as good in a recipe.

[Just Some Guy]

@b_lookingglass absolutely, I've become a real fan of their "Simple Truth" brand, though you have to read carefully, only about half those products are organic. The quality is excellent, the prices are good, and I imagine the margin is better than name brands. It's like the hidden Trader Joe's in your local Kroger.

Does that affect the sales analysis? Yes, I suppose it might, at least modestly. Thanks for pointing it out.

(in fact I expect many of the actual suppliers are the same ones supplying Trader Joe's, the products themselves may be identical or slightly different, and in some cases I prefer the Kroger version.)

[elwalle]

Outstanding