Kroger (KR) Beats Q3 Earnings Estimates, Lifts FY22 View
The Kroger Co. KR came up with third-quarter fiscal 2022 results, wherein the top and bottom lines not only came ahead of the Zacks Consensus Estimate but also improved year over year. The company also registered growth in identical sales without fuel. Better execution and the sustained demand for food resulted in a stronger-than-anticipated quarter. This prompted management to lift the fiscal 2022 guidance.
This Cincinnati, Ohio-based company has been making significant investments to enhance product freshness and quality and expand digital capabilities. Impressively, Kroger has been introducing new items under its “Our Brands” portfolio and launched 147 new items during the quarter under review.
Let’s Introspect
Kroger posted adjusted earnings of 88 cents a share, which surpassed the Zacks Consensus Estimate of 82 cents and increased from the 78 cents reported in the prior-year quarter.
Total sales of $34,198 million came ahead of the Zacks Consensus Estimate of $33,999 million. Markedly, the metric rose from the $31,860 million reported in the year-ago period. Excluding fuel, sales rose 6.4% from the year-ago period. We note that identical sales, without fuel, jumped 6.9%. Our Brands identical sales rose 10.4%, while digital sales grew 10%.
We note that the gross margin was 21.4% of sales. The FIFO gross margin rate, excluding fuel, contracted 5 basis points compared to the same period last year. The adjusted FIFO operating profit came in at $1,094 million, up from the $974 million reported in the year-ago period.
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Other Financial Aspects
Kroger ended the quarter with cash of $241 million, total debt of $13,230 million and shareowners’ equity of $9,929 million. Net total debt increased by $798 million over the last four quarters. Management estimates capital expenditures in the band of $3.2-$3.4 billion and expects to generate free cash flow between $2.3 billion and $2.5 billion in fiscal 2022.
2022 View
Management now envisions identical sales, without fuel, to be up 5.1-5.3% in fiscal 2022 compared with the 0.2% growth registered in fiscal 2021. The company anticipates the FIFO operating profit in the band of $4.8-$4.9 billion compared with the $4.3 billion reported in fiscal 2021.
Kroger now anticipates fiscal 2022 earnings between $4.05 and $4.15 per share, suggesting an increase from the adjusted earnings of $3.68 reported in fiscal 2021.
The company had earlier guided identical sales, without fuel, in the bracket of 4-4.5% and the FIFO operating profit in the range of $4.6-$4.7 billion for fiscal 2022. It had previously estimated earnings between $3.95 and $4.05 per share.
Shares of this Zacks Rank #3 (Hold) company have advanced 8.6% year to date compared with the industry’s rise of 5.7%.
3 Hot Stocks to Consider
Here we have highlighted three better-ranked stocks, namely Crocs CROX, Chipotle Mexican Grill CMG and Arhaus ARHS.
Crocs, a leader in innovative casual footwear for women, men and children, carries a Zacks Rank #2 (Buy). CROX has an expected EPS growth rate of 15% for three to five years. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Crocs’ current financial-year sales and EPS suggests growth of 51.5% and 23.7%, respectively, from the year-ago period. CROX has a trailing four-quarter earnings surprise of 18.2%, on average.
Arhaus, a lifestyle brand and premium retailer in the home furnishing market, carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 14.3%.
The Zacks Consensus Estimate for Arhaus’ current financial-year revenues and EPS suggests growth of 49.1% and 21.7%, respectively, from the year-ago reported figure. Arhaus has a trailing four-quarter earnings surprise of 112%, on average.
Chipotle Mexican Grill, an operator of fast-casual restaurants, currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 23.4%.
The Zacks Consensus Estimate for Chipotle Mexican Grill’s current financial-year revenues and EPS suggests growth of 15.1% and 31%, respectively, from the year-ago reported figure. CMG has a trailing four-quarter earnings surprise of 4.1%, on average.
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