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What happened
Actions of Kroger, Inc. (NYSE: KR) were down today, after the supermarket operator released a report of mediocre results in the second quarter. Comparable sales were lower than analysts' estimates and the company cautioned against future earnings growth as it continues to make investments. As a result, Kroger shares closed down 9.9%.
Source of the image: Getty Images.
So what
The country's largest traditional supermarket operator said comparable sales rose 1.6% in the quarter, a solid but below analysts' performance at 1.8%. Total revenue increased 1%, or 1.8%, excluding the impact of fuels, divestitures and acquisitions, to $ 27.9 billion, slightly less than the consensus of $ 28 billion.
Gross margin decreased by 36 basis points to 21.3% as a result of lower prices, higher transportation costs and growth in the low margin specialty pharmacy business. Operating, general and administrative expenses increased by 36 basis points as a percentage of sales as a result of higher incentive plan expenses. Adjusted earnings per share (EPS) increased from $ 0.39 to $ 0.41, with the company benefiting from a lower tax rate and a higher number of shares. reduced. This result is ahead of estimates at $ 0.38. Digital sales grew again rapidly, growing more than 50%.
CEO Rodney McMullen said:
We are only two-quarters in our three-year Restock Kroger plan, and we are making solid progress. Kroger customers have more than ever the means to communicate with us seamlessly with our recent launch of Kroger Ship, the increased availability of Instacart, the success of the ClickList offering and the sale of Simple Truth in China via Tmall from Alibaba. We are pleased with our diluted earnings per share and second quarter ID sales results. We expect our space optimization investments in the first half of 2018 to continue toward the end of the third quarter.
Now what
For the future, like-for-like sales will amount to 2.5% and adjusted earnings per share from $ 2.00 to $ 2.15, compared to $ 2.12 for analysts and $ 2.04 for year 2017.
Investors seem frustrated with Kroger's lack of earnings growth, but the company is taking significant steps in its Restock Kroger initiative to improve store layout and private label as well as delivery and pickup options. He also does business with companies like Ocado and Home Chef to evolve his business to meet clients wherever they are. Although earnings growth may be stalled, the company is clearly taking steps to make itself more competitive. That being said, it is difficult for investors to be disappointed with the company's performance despite massive sales.
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