On June 15th The Kroger Company (KR) posted results for Q1 of FY 2023 ending May 20th 2023. Kroger is the second largest retailer of groceries in the U.S. and is a pure supermarket play subject to the pressures of an escalation in food costs, logistics and labor and the impact of inflation in common with national and regional competitors. Kroger has announced the intention of acquiring competitor Albertsons Cos. Creating an enterprise with 5,000 stores subject to FTC and DOJ approval and inevitable divestment of some assets.
For the quarter, Kroger earned $962 million on revenue of $45,165 million with a diluted EPS of $1.32. For the corresponding Q1 of FY 2022, Kroger earned $666 million on sales of $44,600 million with a diluted EPS of $0.90. Revenue was 1.3 percent higher. Gross margin increased by 3.2 percent to 22.3 percent compared to Q1 2022. Operating margin declined 2.9 percent to $1,470 million from $1,509 million in Q1 of 2022. In the event Kroger disappointed on the top line against a consensus revenue estimate of $45,240 million but exceeded on adjusted EPS of $1.51 against an expectation of $1.46.
Rodney McMullin CEO Kroger |
In commenting on quarterly results, Rodney McMullen CEO stated, "Kroger achieved solid first quarter results guided by the execution of our Leading with Fresh and with Accelerating with Digital strategy. As more customers are feeling the effects of inflation and economic uncertainty, we are growing customer households by providing fresher products at affordable prices with personalized rewards. Our amazing associates are bringing this strategy to life every day by delivering a full, fresh and friendly shopping experience with zero compromise on quality, selection and convenience”.
He concluded, “Looking forward, Kroger's go-to-market strategy positions us well in a wide range of economic environments to continue to deliver for our customers, invest in our associates and achieve sustainable and attractive returns for shareholders."
The Company release affirmed FY 2023 Guidance:-
- Identical Sales growth of 1.0 to 2.0 percent (excluding fuel)
- Adjusted EPS of $4.45 to $4.60
- Adjusted FIFO Operating Profit of $5.0 billion to $5.2 billion
- Capital expenditure of $3,400 to $3,600 million
- Adjusted free cash flow of $2,500 million to $2,700 million
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Comparable same-store sales for Q4 increased by 3.5 percent (excluding fuel) compared to Q1 FY 2022 and digital sales were up by 15.0 percent.
On May 20th Kroger posted total assets of $50,193 million of which $3,009 million comprised goodwill and intangibles. Long-term debt and lease obligations amounted to $20,062 million.
The Kroger Company had an intraday market capitalization of $33,880 million on June 15 2023. The Company has traded over the past fifty-two weeks in a range of $41.82 to $52.00 with a 50-day moving average of $47.95. KR trades with a forward P/E of 10.6. On June 14th 2023 the share closed at $47.26 pre-release and opened on June 15th at $44.72
Twelve-month trailing operating margin was 3.1 percent and profit margin 1.5 percent. The Company generated a return on assets of 5.8 percent and 23.1 percent on equity
At the end of FY 2022 The Kroger Company operated 2,726 stores with 2,252 pharmacies and 1,613 fuel centers, under 25 banners in 35 states and D.C. Kroger operates 34 food plants and 45 distribution centers with five Ocado fully automated fulfillment centers with as many as twenty planned