Stocks of Kroger Rise After Earnings Beat Expectations

Kroger Co.’s stock saw a 2.5% rise early Thursday after the grocery chain reported better-than-expected first-quarter earnings and reaffirmed its guidance.

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The Cincinnati-based company posted a net income of $947 million, or $1.29 per share, for the quarter, which was a slight decrease from $962 million, or $1.32 per share, in the same period last year. When adjusted for one-time items, earnings per share (EPS) were $1.43, surpassing the FactSet consensus of $1.35.

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Sales increased to $45.269 billion from $45.165 billion the previous year, also exceeding the FactSet consensus of $44.867 billion. Same-store sales, excluding gas, rose by 0.5%, compared to the 0.1% increase anticipated by FactSet.

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CEO Rodney McMullen attributed the company's success to the strength of its grocery business, which he credited to affordable prices and personalized promotions.

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Looking forward, Kroger plans to continue paying a quarterly dividend and expects it to increase over time. However, the company has paused its share buyback program to prioritize reducing debt following its proposed merger with Albertsons Cos. Inc. In March, the U.S. Federal Trade Commission (FTC) filed a lawsuit to block the merger, arguing that it would reduce competition, increase grocery prices, and harm workers, with several states joining the FTC's suit.

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Despite this, Kroger has remained committed to the merger. BMO Capital’s Kelly Bania recently expressed optimism about the company, stating that either outcome—whether the merger proceeds or not—would be beneficial for Kroger.

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Kroger has maintained its full-year guidance for same-store sales excluding fuel to rise between 0.25% and 1.75% and for EPS to be between $4.30 and $4.50. FactSet's consensus forecast is for same-store sales to increase by 1.1% and for EPS to be $4.44.

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Year-to-date, Kroger’s stock has gained 14%, while the S&P 500 has risen 15%.

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