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Alberto Abaterusso
Alberto Abaterusso
Articles (488) 

Kroger Reports 1st-Quarter Results

Shares dipped after the supermarket chain lowered earnings guidance for 2017

June 16, 2017 | About:

The Kroger Co. (NYSE:KR) – the supermarket chain headquartered in Cincinnati, Ohio – posted its first-quarter 2017 results on June 15.

The company closed the quarter reporting adjusted earnings per share of 58 cents, or $546 million, in line with analysts’ expectations.

Source: Yahoo Finance

This represents a 18.6% decline on a year-over-year basis. At the end of first-quarter 2016, Kroger reported adjusted EPS of 71 cents, or $696 million.

Including the effects of discontinued operations, the company reported EPS of 32 cents, equal to a net profit of $303 million.

Revenue for the quarter came in at $36.29 billion, a 4.9% increase year over year or a 2.9% increase year over year when fuel is excluded. The company beat analysts’ expectations on revenue by $520 million. The estimate was $35.77 billion.

The gross margin for the quarter was 22.1%, up 45 basis points from the year-ago quarter.

The company reported increases in operating, general and administrative costs (up 10.3%), costs for rent ( up 3.1%) and in depreciation and amortization charges (up 6.1%) for the quarter.

The company reported it had approximately $356 million in cash and securities for the quarter. It produced $2.308 billion in cash flow from operations, an 11.01% increase year over year. The current ratio is 0.76 versus the industry average of 1.24.

The total debt amounted to $11.590 billion. The long-term debt-equity ratio is 219.14. The interest coverage ratio of 7.51 is below the industry average of 78.29.

Kroger Chairman and CEO Rodney McMullen commented on the company's first-quarter performance, saying its strategy of lowering costs to reinvest in order to create value will not only make a difference for customers, but also for shareholders.

The company distributes an annual dividend of 48 cents through quarterly payments of 12 cents, for a dividend yield of 2.15% based on the current stock price. The dividend, which is expected to grow over time, is currently paid out to according to a ratio of 21.95% of the company’s earnings.

The supermarket chain lowered the guidance for full-year adjusted earnings to between $2 and $2.05 per diluted share. The previous guidance ranged between a minimum of $2.21 and a maximum of $2.25. For 2017, analysts forecast EPS of $2.14.

Since Kroger lowered its expectations on earnings, shares declined 9.24% to $22.29 on the New York Stock Exchange with a price-earnings (P/E) ratio of 10.87, a price-sales (P/S) ratio of 0.18 and a price-book (P/B) ratio of 3.07.

The analysts’ average target price is $32.05, which represents a 45.80% upside from the current share price. The recommendation rating is 2.4 out of 5.

Disclosure: I have no positions in Kroger.

About the author:

Alberto Abaterusso
Alberto Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds a MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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GuruFocus has detected 3 Warning Signs with The Kroger Co $KR.
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