Kroger comfortably beat earnings expectations for the most recent quarter, but didn’t raise its estimates for full-year earnings.
Kroger (Ticker: KR) said Thursday it expects earnings of $4.45 to $4.60 per share for the fiscal year ended January, in line with the grocer’s March forecast. At the midpoint — $4.52 per share — the earnings outlook slightly missed analysts’ expectations of $4.54 per share.
Investors were probably hungry for more as the grocer had steadily raised its full-year profit guidance in recent quarters. For example, Kroger raised its earnings expectations for fiscal 2022 when it reported results last June, September, and December.
The stock fell 4.1% to $45.30 in Thursday trading.
Still, the grocer reported earnings of $1.51 per share for the fiscal first quarter, ahead of the $1.46 per share that analysts covering FactSet had been expecting. Revenue for the quarter ended April was $45.2 billion, just short of expectations of $45.3 billion. Same-store sales for the period were 3.5%, ahead of forecasts of 3.4%.
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In a conference call to discuss the results, Kroger CEO Rodney McMullen said the economic environment is having a greater impact on low-income consumers, who are shifting to smaller pack sizes and lower-priced products, while there is more engagement with promotions.
Despite the high level of promotional activity, revenue is likely to have been boosted by higher-income consumers, who McMullen said are increasing their spending at Kroger and also growing in numbers during the most recent quarter.
Overall, retailers with a greater focus on essential items have benefited this earnings season as shoppers have less cash to spare for essentials due to increased inflation. Unnecessary buying is being scaled back in response to a slowing macro environment, as evidenced by recent gains from Target (TGT) and Foot Locker (FL).
Beyond the financials, Kroger also gave investors an update on its merger with grocer Albertsons
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(ACI). The deal, announced in October, is still under scrutiny by regulators amid the threat of competition in grocery retail. McMullen said the company is in the process of identifying potential buyers for the businesses, which it must divest in order to gain approval for the deal.
Write to Karishma Vanjani at [email protected]