Q2 Results
Though earnings topped expectations in the second quarter, the underlying weakness was evident from the muted sales growth, which also missed the forecast. Revenues edged up 1% to $28.2 billion, while adjusted earnings advanced 7% to $0.44 per share. During the conference call, CEO Rodney McMullen cautioned that this year, the bottom-line might not benefit from the ongoing restructuring program in a meaningful way.
Cost
Management
The efforts at merchandise optimization and cost-cutting measures will have a positive effect on third-quarter results. However, a part of the gains could be offset by elevated transportation costs and fuel expenses. Margins might come under pressure from investments related to the reorganization. It needs to be noted that currently, the company is fighting to retain its market share.
Comps
in Focus
Of late, there has been an improvement in store footfall after Kroger launched new facilities like self-checkout and ‘order online-pickup in-store’. Comparable sales stand to benefit from the aggressive stroe remodeling program and optimization of space, with focus on technology.
It is estimated that third-quarter sales would get a fillip from the recent launch of food halls in select locations to facilitate on-site dining, reversing the recent trend.
The majority of the analysts recommend hold for Kroger’s stock that slipped to a two-year low in July, before regaining momentum in recent weeks. The stock, which traded below the $30-mark this week, is on the growth path.
Peer
Performance
Last month, Walmart (WMT) reported third-quarter earnings that exceeded estimates and raised its full-year 2020 guidance, to reflect improvements in the domestic market. Aided by positive comparable store performance, revenues and earnings of the retail behemoth grew 2.5% and 7% respectively.