Post Earnings Coverage: Kroger Tops Earnings Estimates

LONDON, UK / ACCESSWIRE / June 17, 2016 / ActiveWallSt.com announces its post-earnings coverage on The Kroger Co. (NYSE: KR). One of the largest grocery retailers in the U.S posted its first-quarter 2016 results on Thursday, June 16, 2016, with earnings surging 9.9% to $680 million, topping market estimates. Revenue, nonetheless, came marginally lower than expectation. The company also reiterated its full-year earnings and revenue forecasts. Register with us now for your free membership and see our complete earnings coverage on this equity at:

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Earnings Review

For Q1FY16, Kroger reported earnings of $0.70 per share as compared to earnings of $0.63 per share in Q1FY15, beating analysts’ consensus estimates of earnings of $0.69. For Q1 FY16, revenue (including fuel centre sales and Roundy’s Inc.) grew 4.7% to $34.6 billion from the year ago period, missing analysts’ consensus estimate of $34.66 billion. Excluding fuel, revenue rose 7.8% in Q1 FY16.

Kroger’s identical store sales, locations open for five full quarters without expansion or relocation grew by 2.4%, excluding fuel in Q1FY16, as compared to 5.7% in Q1 FY15, marking 50th consecutive quarter of growth. Although growth in same store slow down, it was better that the 1% growth reported by rivals such as Wal-Mart Stores Inc. (NYSE: WMT) and Target Corp. (NYSE: TGT).

Kroger’s operating margin improved to 3.5% of sales as compared to 3.3% in Q1 FY15. The improvement in operating margin suggests the sales growth slowdown was primarily related to lowering food price instead of competitive pressures. Operating income rose 8.9% on y-o-y basis to $1.2 billion in Q1 FY16. Operating expenses declined 4 basis points y-o-y as a percentage of sales. Operating cash flow improved to $2.1 billion in Q1 FY16 from $1.8 billion in the year ago period.

Future Plans

Kroger has expanded its ClickList and ExpressLane online ordering services in 25 markets in Q1 FY16, up from seven in Q4 FY15. The company is in the middle of a $3.6 billion capital expansion, with one of its aims being to roll out online services nationally in a short time frame to ward off competitors such as Amazon.com, Inc. (NASDAQ: AMZN) expanding into the grocery category. The company is also expanding its base by acquiring smaller grocery chains. Kroger acquired Midwestern supermarket chain Roundy’s in December, 2015 for $866 million.

Guidance

The Cincinnati, Ohio-based company confirmed its fiscal 2016 earnings per share guidance of $2.19-$2.28 per share. Kroger stated that earnings may come at the low-end to mid-point of this range based on current fuel margin trends. Identical Store Sales, excluding fuel, are expected to improve by 2.5% to 3.5%.

Stock Performance

Kroger shares saw an intraday high of $36.98 during the session, post its earnings release, before closing at $35.47 which was a slight correction of 0.67% from its previous closing price of $35.71. Kroger’s stock has declined 14.71% since the beginning of the year with concerns related to the U.S. economy. Nonetheless, the stock is up 2.93% in the past one month as compared to S&P 500 which is up 1.50% during the same time frame.

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