The Kroger Co (KR, Financial) released its 8-K filing on June 20, 2024, reporting its first quarter 2024 results. The company reaffirmed its guidance and provided updates on its strategic initiatives.
Kroger is one of the largest grocery retailers in the United States with more than 2,700 stores across a portfolio of over 20 supermarket banners. The company touts its ingrained position across US communities, citing that it is a top-two grocer in most of its major market areas. Over one fourth of Kroger's roughly $110 billion in nonperishable and fresh food sales (about 75% of revenue) stems from its private-label portfolio, of which the company manufactures about 30% of units via its 33 food production plants. The firm also operates fuel stations and pharmacies at 60% and 80% of its locations, respectively.
Performance Overview
The Kroger Co (KR, Financial) reported earnings per share (EPS) of $1.29 for the first quarter of 2024, missing the analyst estimate of $1.35. Adjusted EPS came in at $1.43, down from $1.51 in the same period last year. Total sales for the quarter were $45.3 billion, slightly exceeding the analyst estimate of $45.038 billion and up from $45.2 billion in the first quarter of 2023.
Operating profit for the quarter was $1.294 billion, compared to $1.470 billion in the same period last year. Adjusted FIFO operating profit was $1.499 billion, down from $1.669 billion in Q1 2023. The FIFO gross margin rate, excluding fuel, decreased by 7 basis points, primarily due to lower pharmacy margins and increased price investments, partially offset by favorable product mix reflecting Our Brands margin performance.
Key Financial Metrics
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Earnings Per Share | $1.29 | $1.32 |
| Adjusted EPS | $1.43 | $1.51 |
| Operating Profit | $1.294 billion | $1.470 billion |
| Adjusted FIFO Operating Profit | $1.499 billion | $1.669 billion |
| Total Sales | $45.3 billion | $45.2 billion |
Challenges and Achievements
The Kroger Co (KR, Financial) faced several challenges during the quarter, including lower pharmacy margins and increased price investments. However, the company managed to offset some of these challenges with favorable product mix and strong performance from its private-label portfolio.
Chairman and CEO Rodney McMullen commented,
Kroger is off to a solid start in 2024 led by better-than-expected performance of our grocery business. Kroger is delivering exceptional value at a time when many customers need it more than ever, by providing affordable prices with personalized promotions."
Capital Allocation and Debt Management
Kroger expects to continue generating strong free cash flow and remains committed to investing in the business to drive long-term sustainable net earnings growth. The company has paused its share repurchase program to prioritize de-leveraging following the proposed merger with Albertsons. Kroger’s net total debt to adjusted EBITDA ratio is 1.25, compared to 1.34 a year ago, with a target range of 2.30 to 2.50.
Conclusion
Despite missing the EPS estimate, The Kroger Co (KR, Financial) demonstrated resilience with a slight revenue beat and reaffirmed its full-year guidance. The company's strategic focus on delivering value to customers and investing in associates positions it well for sustainable growth. Investors will be keen to see how Kroger navigates the challenges ahead and capitalizes on its strengths in the competitive grocery retail market.
Explore the complete 8-K earnings release (here) from The Kroger Co for further details.
