Kroger Co. (KR, Financial), the American retailing company, came out with its second quarter earnings on Sept.13. While the company’s quarterly profits surpassed estimates, its revenue growth fell shy of expectations.
Bird’s-eye view
Kroger posted adjusted net earnings per share of 41 cents, which was 3 cents more than analysts' estimates. /the company recorded a 1% year-on-year revenue growth during the same period to $27.87 billion. The company was engaged in restructuring and remodeling 600 stores during the quarter so as to create more space for products that can help company generate high volumes of sales in future. This investment towards space optimization would certainly pay dividends to the company in the third quarter.
Mike Schlotman, Kroger’s CFO, commented, “The stores are disrupted and it naturally lowers sales a little bit when there’s less product and disruption in the store.” He added: “That peaked in the second quarter.”
The company’s profit for the three months ending June came in at $508 million. Kroger posted same-store sales growth of 1.6%, down from 1.9% forecast. These key metrics are comparatively weaker than that reported by Wal-Mart (WMT, Financial) and Target (TGT).
Kroger registered an impressive digital sales growth of 50% in the second quarter but at the cost of declining margin, down 0.36% to 21.3%.
Efforts
The company has been, of late, investing in Kroger Restock initiative to compete against the likes of Walmart and Amazon (AMZN, Financial). The main focus here is to build a flawless shopping experience so as to serve customers, anything, anytime and anywhere. In addition, the company announced a partnership with Nuro, a maker of fully unmanned road vehicles, in August. Both the companies would be working towards making grocery delivery more convenient and fitting to customers.
Dave Furguson, cofounder of Nuro, said, "Unmanned delivery will be a game-changer for local commerce, and together with Kroger, we're thrilled to test this new delivery experience to bring grocery customers new levels of convenience and value ... Our safe, reliable, and affordable service, combined with Kroger's ubiquitous brand, is a powerful first step in our mission to accelerate the benefits of robotics for everyday life."
Guidance
The company projects full-year earnings per share in the range of $3.64 and $3.79. Kroger anticipates comps growth for the year between 2% and 2.5% and sees capital expenditure for 2018, excluding merger, acquisitions and purchase of lease facilities, to stand at approximately $3 billion.
Disclosure: I do not hold any position in the stocks mentioned in this article.
