Earnings preview: How will Q2 turn out for Kroger?

The Kroger Co. (NYSE: KR) is slated to report second quarter 2019 earnings results on Thursday, September 12, before the market opens. Analysts expect the company to report earnings of $0.41 per share on revenue of $28.38 billion.

The retail sector is seeing heavy competition with major players investing heavily in improving their delivery services and omni-channel capabilities. This is particularly visible in the grocery space where companies like Kroger have introduced several new initiatives to drive traffic and sales. The Restock Kroger program, along with other investments, are likely to benefit the second quarter results.

Kroger has also expanded its assortment with the launch of Simple Truth Plant-Based food products. The acquisitions of Ocado, Home Chef, and Nuro will also help in improving the company’s capabilities and driving growth. However, higher costs are likely to weigh on margins in the to-be-reported quarter.

In the first quarter of 2019, Kroger missed revenue estimates while earnings matched expectations. Sales dipped 1.2% to $37.2 billion while adjusted EPS declined 1.4% to $0.72. The topline numbers were impacted by the sale of Kroger’s convenience store business unit. Identical sales, excluding fuel, increased 1.5%.

Also see: Kroger Q1 2019 Earnings Conference Call Transcript

For fiscal 2019, Kroger expects GAAP EPS to be $2.38 to $2.48 and adjusted EPS to be $2.15 to $2.25. Identical sales growth, excluding fuel, is predicted to be in the range of 2% to 2.25%. Kroger’s financial strategy is to use its free cash flow to drive growth while maintaining its current investment grade debt rating and returning capital to shareholders. 

Kroger’s shares have gained 4% in the past three months and 7% in the past one month. The stock was up 1.5% during afternoon hours on Monday.

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