Categories Analysis, Retail

Kroger (KR) looks set to report mixed Q1 results. Here’s what to expect

Experts are looking for a modest decline in Q1 adjusted earnings and an increase in sales

Grocery retailer The Kroger Co. (NYSE: KR) is scheduled to release first-quarter results next week. The company has effectively navigated recent market challenges aided by its aggressive go-to-market initiatives and by effectively executing the strategy of providing customers with a fresh and affordable shopping experience.

The stock reached its highest-ever value in April 2022 but then entered a phase of fluctuations. However, it looks poised to regain momentum this year and create good shareholder value. Overall, the market’s outlook on the stock is positive, with the average price target indicating a 26% growth in the next twelve months. Compared to its peers, KR’s valuation is reasonable and it offers a dividend yield of 2.1% which is slightly above the S&P 500 average.

Shift in Trend

It is estimated that more and more customers are gravitating towards affordable food options like homemade meals and spending less on food away from home due to high inflation and financial uncertainties, which bodes well for Kroger. Enhancing its e-commerce and delivery capabilities is a key priority for the company now, a strategy that should work in its favor for the long term.

Kroger’s CEO Rodney McMullen said during the last earnings call, “Our research shows that cooking at home is three to four times less expensive than dining out. And it’s Kroger was there for our customers innovating quickly to meet their needs and wants. Our nimble and customer-focused approach helped us deliver strong results in 2022, leading to total household growth and enhanced customer loyalty. We saw an especially strong response in our higher income households as this segment grew by 1.1 million households.”

Kroger Q4 2022 earnings infographic

Kroger’s first-quarter 2023 financial report is slated for release on June 15, before the opening bell. According to market watchers, net profit is expected to drop by a cent to $1.44 per share. The consensus sales estimate for the April quarter is $34.8 billion, which is up 5% year-over-year.

Financials

The company has a good track record of delivering better-than-expected results — quarterly earnings topped expectations regularly in the past three years. The trend continued in the final months of 2022, though the top line missed estimates. In the fourth quarter, sales and adjusted profit increased to $34.8 billion and $0.99 per share respectively even as identical sales moved up 6.2% annually to $30.6 billion.

As per the management’s most recent guidance, adjusted earnings, operating earnings, and free cash flow would increase annually in fiscal 2024. Meanwhile, full-year identical sales are expected to decline.

The performance of Kroger’s stock has not been very encouraging ahead of next week’s earnings. After losing steam in recent weeks, the shares traded higher on Friday afternoon.

Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!

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