Earnings Preview: What to look for when Kroger (KR) reports Q4 2024 results

Supermarket giant Kroger Co. (NYSE: KR) is scheduled to report its fourth-quarter earnings on Thursday. This event is particularly significant since it follows the termination of the company’s merger with Albertsons and the unexpected resignation of its CEO. Kroger has been facing multiple challenges lately, including increasing competition and a sales slowdown amid cautious consumer spending.

Kroger’s stock fell on Monday after the company announced the resignation of its long-time chief executive officer Rodney McMullen following an internal investigation into his conduct. Last month, Kroger’s stock climbed to an all-time high of $65.80 and maintained that level. In the past twelve months, the value has increased by one-third, which is better than the 17% growth of the S&P 500 index.

Estimates

The Cincinnati-based grocery chain’s financial performance has not been very impressive this fiscal year. Analysts’ estimates suggest that the weakness extended into the final months of the year. Their consensus earnings estimate for the fourth quarter is $1.11 per share, on an adjusted basis, compared to $1.34 per share in the prior-year quarter. Revenue is expected to decline 5.7% from last year to $34.95 billion in Q4. The report will be released on Thursday, March 6, at 8:00 am ET.

“Customer engagement remains strong. Our convenient seamless shopping experience, along with incredible customer value through low prices, personalized offers, and great quality Our Brands products, drove growth in both total and loyal households. As we entered the last quarter of 2024, we are focused on providing the quality, fresh, and affordable products that make holiday celebrations special. Customer spending habits continue adjusting to current macroeconomic factors,” said former CEO Rodney McMullen at the Q3 earnings call.

CEO Steps Down

McMullen resigned as chairman and chief executive officer after an investigation revealed that his conduct was inconsistent with the company’s policy on business ethics. Lead director Ronald Sargent has been appointed as chairman of the board and interim chief executive officer. McMullen’s exit comes months after Kroger’s $25-billion merger with Albertsons fell through, prompting the latter to sue the company for breach of contract.

As part of its efforts to enhance customer loyalty and boost sales, Kroger has been offering discounts and facilities like personalized shopping. The company is betting on the economic recovery and slowing inflation to regain strength and compete effectively with rivals like Walmart and Costco. Meanwhile, recent data show that most consumers are concerned about the current macroeconomic situation and remain cautious in their spending.

Mixed Q3

For the third quarter, the retailer reported mixed results – adjusted earnings moved up 3% year-over-year to $0.98 per share, while sales edged down to $33.6 billion. Identical sales, without fuel, increased by 2.3%. On an unadjusted basis, net income was $618 million or $0.84 per share in the third quarter, compared to $646 million or $0.88 per share last year. For fiscal 2024, the management predicts identical sales growth of 0.75% to 1.75%, and adjusted earnings in the range of $4.30 per share to $4.50 per share. Quarterly earnings have beaten estimates regularly for about five years, including in Q3.

In the past four months, Kroger’s shares have traded above their 52-week average. The stock was trading down 3.5% on Monday afternoon, after opening the session at $63.93.