The Kroger Co. (KR, Financial), a major grocery store chain, said third-quarter sales increased over 4% as the company reported continued growth and innovation across its business segments.
The Cincinnati, Ohio-based grocery store chain reported net earnings of 44 cents per diluted share, outperforming analyst expectations by one cent and prior-year quarter results by three cents.
Brief summary of earnings
Kroger reported $27.7 billion in total revenue for the quarter, driven by strong core business and fuel results. Excluding fuel, total sales increased 3% from the prior-year quarter.
CEO Rodney McMullen said “the holidays are always Kroger’s time to shine.” According to McMullen, Kroger reported “the best ever Black Friday results for general merchandise,” including solid sales from Fred Meyer and Restock Kroger. Company gross margins increased 0.3% from the prior-year quarter, driven by lower cost of goods and sales mix.
Company offers positive growth momentum for fiscal 2018
McMullen said this quarter’s results reflect positive momentum through strategic investments for the future. For the fourth quarter, Kroger expects identical supermarket sales growth to exceed 1.1%, i.e., improve from this quarter. The company expects full-year earnings between $1.74 and $1.79 per diluted share.
Kroger’s profitability ranks 7 out of 10, suggesting solid growth potential. The company’s three-year CAGR of sales and three-year CAGR of earnings both outperform 68% of global competitors.
Kroger’s share price increased 12% from its previous close of $24.38 as the company reported strong sales growth and outperformed analyst expectations.
Kroger is relatively undervalued even though its price-book ratio of 4 underperforms 67% of global grocery stores. The company has a price-earnings ratio of 16.63 and a price-sales ratio of 0.21, the latter ranking higher than 82% of global competitors.
Disclosure: No position in Kroger.
