Kroger Q3 EPS Miss Estimates, Reaffirms FY 2019, 20 EPS View

Kroger Q3 EPS Miss Estimates, Reaffirms FY 2019, 20 EPS View
December 6, 2019


The shares of Kroger Co (KR: NYSE) fell 3.04% or $0.84 to close at $26.80 after the largest US supermarket chain by revenue reported Q3 earnings below the Street estimates. The company also missed the revenue estimate of analysts. While reporting Q3 results, Kroger reaffirmed adjusted earnings and same-store sales growth outlook for FY 2019 and FY 2020.

Cincinnati, Ohio-based Kroger reported 3Q 2019 revenues of $27.97 billion, an increase of 0.5% from $27.83 billion in the similar period last year. Analysts polled by FactSet had anticipated the company to post revenues of $28.20 billion for the reported quarter. In the past four quarters, the retail store giant had surpassed the Wall Street estimates twice.

For the third quarter, ended November 9th, 2019, the company posted earnings of $263 million, or $0.32 per share, compared with $317 million, or $0.39 per share in the prior-year period.

Excluding other charges, Kroger recorded third-quarter adjusted earnings of $381 million, or $0.47 per share, down from $394 million, or $0.48 per share in the comparable quarter last year. Analysts polled by Thomson Reuters anticipated the company to report earnings of $0.49 per share for the quarter. Twice in the past four quarters, Kroger has exceeded consensus EPS estimates.

The company reported identical sales (without fuel) growth of 2.5% and digital sales growth of 21%. FactSet analysts anticipated the company to post identical sales growth of 2.3%.  Identical sales are commonly referred to as same-store sales.

During the quarter, Our Brands sales rose 3.4% on a y-o-y basis. The company also rolled out 231 new Our Brands products, including “Simple Truth Plant-based product range, featuring fresh meatless burger patties.” Kroger also launched several products that appeal to shoppers who are looking for meat and dairy alternatives. Furthermore, the company expanded its pickup locations to 1,915. Likewise, delivery locations were increased to 2,326, covering more than 96% of Kroger households.

For FY 2019, Kroger continues to expect adjusted earnings in the range of between $2.15 and $2.25 per share. The company also reaffirmed its adjusted identical sales growth of 2% to 2.5%. Similarly, for fiscal 2020, Kroger reaffirmed adjusted earnings in the range of $2.30 to $2.40 per share. The company also continues to expect adjusted identical sales growth of roughly 2.25%.

On average, analysts surveyed by Thomson Reuters anticipate Krogers to post earnings of $2.20 per share for FY 2019 and $2.33 per share for FY 2020.

Kroger has also revealed its intention to divest its stake in Lucky’s Market. In this regard, the company recognized a one-time non-cash impairment charge of $238 million in 3Q 2019.

Kroger Chairman and CEO Rodney McMullen justified the decision to divest Lucky’s Market. “The amount of investment that it would take for Lucky’s to be a meaningful contributor to Kroger overall and the efforts that it would take, we just didn’t think it created a good return for the investments that were needed to be made relative to that. So it was really driven by narrowing our focus and the additional requirements to make it something that would be meaningful to Kroger.”

The weak quarterly earnings are expected to keep the stock weak in the short-term.

Technically, the stock is facing resistance at 29. The next support is anticipated only near 22 levels. Furthermore, the Stochastic RSI indicator is in the overbought region. Therefore, we are expecting the stock to remain in a downtrend in the days ahead.

kr - technical analysis - 6th Dec 2019

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Richard W

Richard W

Richard is the guy who know everything there is about the financial industry, working in a top firm for over 15 years, he will give the lowdown on some of the biggest companies in the world

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