Mixed Q1
First-quarter net sales were $45.12 billion, broadly unchanged from the prior-year period. Identical sales, without fuel, increased by 3.2% during the three months, and e-commerce sales grew by 15%. The top line fell short of expectations, continuing the recent trend.
Adjusted earnings increased to $1.49 per share in the first quarter from $1.43 per share in the corresponding period of fiscal 2024. Net income was $866 million or $1.29 per share in Q1, compared to $947 million or $1.29 per share last year. Gross margin moved up to 23% in Q1 from 22% in the year-ago quarter. The company has a strong track record of delivering better-than-expected earnings, including in the April quarter.
From Kroger’s Q1 2025 earnings call:
“We are reassessing our capital allocation strategy to make sure we are spending our capital on projects that offer the highest returns. We are reviewing our non-core assets. We’re aggressively looking for ways to reduce costs throughout the company, and we expect to reinvest those cost savings directly into lower prices and additional store hours for our associates so that they can better serve customers. Finally, we have restructured our leadership team to ensure we have the right talent in place.”
Outlook
The management expects that the company will continue generating strong free cash flow, and it plans to actively invest in the business to drive long-term sustainable profit growth. For fiscal 2025, it expects identical sales, without fuel, to grow between 2.25% and 3.25%. Full-year adjusted earnings per share guidance has been reaffirmed in the range of $4.60 to $4.80. Kroger continues to expect adjusted free cash flow to be between $2.8 billion and $3.0 billion in FY25.
Shares of Kroger have gained about 12% since last week, with the management’s bullish outlook adding to the momentum. On Monday, the stock traded up 2% in the afternoon.