The Kroger Co (KR, Financial) released its 8-K filing on December 5, 2024, detailing its third quarter 2024 financial results. As one of the largest grocery retailers in the United States, Kroger operates over 2,700 stores under more than 20 supermarket banners. The company is a top-two grocer in most of its major markets, with a significant portion of its revenue stemming from its private-label products. Kroger also operates fuel stations and pharmacies at a majority of its locations.
Performance Overview
The Kroger Co (KR, Financial) reported an operating profit of $828 million and an earnings per share (EPS) of $0.84 for the third quarter. The adjusted EPS was $0.98, surpassing the analyst estimate of $0.97. Total company sales were $33.6 billion, slightly below the estimated $34,204.50 million. This was primarily due to the sale of its specialty pharmacy business and lower fuel sales. Excluding these factors, sales increased by 2.7% compared to the previous year.
Strategic Adjustments and Challenges
Kroger's strategic sale of its specialty pharmacy business for $464 million reduced its total sales by approximately $340 million for the quarter. This move, however, improved Kroger's gross margin and operating costs as a percentage of sales. The company continues to face challenges from a competitive grocery market and uncertain macroeconomic conditions, but remains confident in its ability to deliver value to customers and shareholders.
Financial Achievements and Metrics
Kroger's gross margin for the third quarter was 22.9% of sales, with a FIFO gross margin rate increase of 51 basis points, excluding fuel. This improvement was attributed to the sale of the specialty pharmacy, strong performance of its private-label products, and reduced shrinkage. The LIFO charge decreased significantly to $4 million from $29 million the previous year, reflecting lower expected inflation.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Total Sales | $33.6 billion | $34.0 billion |
| Operating Profit | $828 million | Not Provided |
| Adjusted EPS | $0.98 | Not Provided |
Analysis and Future Outlook
Kroger's ability to maintain a strong balance sheet, with a net total debt to adjusted EBITDA ratio of 1.21, positions it well for future growth and shareholder value enhancement. The company has paused its share repurchase program to focus on de-leveraging in anticipation of its proposed merger with Albertsons. This strategic move is expected to bring significant benefits to customers and communities.
"Kroger achieved strong sales results in the third quarter led by our pharmacy and digital performance, which reflects the strength and diversity of our model," said Chairman and CEO Rodney McMullen.
Overall, The Kroger Co (KR, Financial) has demonstrated resilience in a challenging market environment, with strategic initiatives and financial discipline contributing to its robust performance. The company's focus on delivering value and enhancing customer experience continues to drive its growth trajectory.
Explore the complete 8-K earnings release (here) from The Kroger Co for further details.
