Supermarket Kroger Revenues Surge on Covid-19 Stockpiling

Supermarket Kroger Revenues Surge on Covid-19 Stockpiling
June 19, 2020

 

The supermarket chain, Kroger Co (NYSE: KR) reported better-than-anticipated fiscal 2020 first-quarter results, aided by COVID-19 related stockpiling by consumers. The company’s same-store sales also exceeded analysts’ estimates.  The multi-department store operator also refrained from providing outlook due to coronavirus associated uncertainty. As the investors were not happy with the lack of fiscal 2020 guidance, despite the impressive earnings, the stock lost 3.05% or $1.00 to close at $31.81. However, the stock still trades with a gain of 13.2% for the year-to-date.

The Cincinnati, Ohio-based company reported first-quarter sales of $41.549 billion, an increase from $37.251 billion in the comparable quarter last year. Analysts polled by FactSet had anticipated sales of $40.71 billion.

For the quarter ended May 23rd, 2020, the company posted net income of $1.212 billion, or $1.52 per share, compared with $772 million, or $0.95 a share, in the year-ago period. Excluding charges, the company posted 1Q 2020 adjusted earnings of $972 million, or $1.22 a share, an increase from $586 million, or $0.72 per share in 1Q 2019. The FactSet consensus estimates were $1.12 per share.

Commenting on the results, Chairman and CEO Rodney McMullen said: “Under Restock Kroger, we have made significant investments over the last several years to establish a seamless digital ecosystem, strengthen Our Brands and our personalization capabilities, and to enhance product freshness and quality. These investments helped Kroger deliver improved results in 2019, a strong start to the quarter, and very much came to the forefront as we provided our customers with the fresh food and essentials they have needed during the pandemic.”

Comp sales, excluding fuel, increased 19% and surpassed the FactSet same-store sales growth forecast of 13.8%.

The country’s largest supermarket chain recorded online sales growth of 92% in the first quarter.

The company, which owns roughly 2,800 stores across 35 states, did not provide any earnings or revenue outlook as it was unable to quantify the effect of COVID-19 on its business. The company simply said that it anticipates exceeding the outlook provided on April 1st. At that time, the company had forecast fiscal 2020 earnings of $2.74 per share, up from an earlier earnings outlook range of $2.30 to $2.40 per share.

So far, same-store sales growth in the 2Q 2020 has been in the mid-teens, according to the company’s CFO Gary Millerchip. Likewise, e-commerce sales grew in triple digits in the initial three weeks of Q2. Millerchip further pointed out that even pickup and delivery of online orders have lured new consumers and encouraged recurring visits.

Almost all analysts were anticipating Kroger to report strong results, and reliable guidance as the company is one of the top beneficiaries of the COVID-19 outbreak, which encouraged people to stockpile staples. As the company did not issue a fiscal 2020 outlook, which was very much expected by investors, the stock is expected to remain range-bound with a slight bullish bias.

Technically, the stock is having solid support near its 50-day moving average. The Chaikin money flow indicator has a positive reading. Therefore, we are anticipating the stock to rally in the days ahead.

kro - technical analysis - 19th June 2020

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Janine

Janine

Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be


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