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The Kroger Co. KR reported second-quarter fiscal 2025 results that outpaced earnings expectations, while sales came below the Zacks Consensus Estimate. The performance was driven by strength in e-commerce, pharmacy and fresh offerings, supported by operational efficiencies and a focus on customer experience. The upbeat quarter prompted management to raise its identical sales and earnings outlook for the fiscal year.
Kroger posted adjusted earnings of $1.04 per share, surpassing the Zacks Consensus Estimate of $1.00 and improving from 93 cents in the prior-year quarter. On a reported basis, earnings came in at 91 cents a share, up from 64 cents in the year-ago period.
Total sales for the quarter stood at $33,940 million, nearly flat year over year but fell short of the Zacks Consensus Estimate of $34,123 million. However, excluding fuel and the divested Kroger Specialty Pharmacy business, sales advanced 3.8% year over year. Identical sales without fuel rose 3.4%, reflecting strong momentum in key growth categories.
E-commerce sales jumped 16% year over year, following a 15% gain in the first quarter, underscoring the success of Kroger’s digital investments and omnichannel strategy.
Gross margin expanded to 22.5%, up from 22.1% in the year-ago quarter, aided by reduced supply-chain costs, the sale of Kroger Specialty Pharmacy and lower shrink, though partially offset by lower-margin pharmacy sales growth. The FIFO gross margin rate, excluding rent, depreciation and amortization, fuel and adjustment items, jumped 39 basis points year over year.
Adjusted FIFO operating profit reached $1,091 million, up from $984 million recorded in the year-ago period. Reported operating profit came in at $863 million compared with $815 million last year. Operating, General & Administrative (OG&A) expenses as a percentage of sales fell 5 basis points, reflecting productivity gains and cost discipline.
The Kroger Co. price-consensus-eps-surprise-chart | The Kroger Co. Quote
Kroger ended the second quarter with cash and temporary cash investments of $4,883 million (cash $215 million; temporary cash investments $4,668 million), total debt of $17,959 million and shareowners’ equity of $9,277 million. Net total debt was $13,291 million, an increase of $3,614 million over the last four quarters.
Kroger’s net total debt-to-adjusted EBITDA ratio stood at 1.63 (versus 1.24 a year ago), comfortably below the firm’s 2.30-2.50 target range, signaling financial flexibility to support investments and shareholder returns. The company remains on track to complete its $5 billion accelerated share repurchase program in the third quarter and plans to resume open-market buybacks under the remaining $2.5 billion authorization.
The company reaffirmed its fiscal 2025 capital expenditure outlook of $3.6-$3.8 billion and maintained its adjusted free cash flow guidance of $2.8-$3 billion.
Encouraged by its second-quarter performance, Kroger raised the lower end of its full-year guidance. The company now expects identical sales without fuel growth of 2.7-3.4%, up from the prior estimate of 2.25-3.25%.
It now foresees adjusted FIFO operating profit of $4.8-$4.9 billion compared with the earlier projected range of $4.7-$4.9 billion. Management now envisions adjusted EPS between $4.70 and $4.80, up from the $4.60-$4.80 band earlier guided.
Kroger’s second-quarter results highlight its ability to navigate a competitive retail environment through digital acceleration, fresh assortment and cost efficiencies. While sales missed estimates, strong earnings, margin expansion, and raised guidance reflect improving operational trends and strategic execution. With ongoing investments in digital capabilities and share buybacks, Kroger appears well-positioned for sustained shareholder value creation.
Shares of this Zacks Rank #3 (Hold) company have risen 21.5% over the past year compared with the industry’s growth of 25.9%.
Post Holdings, Inc. POST, a consumer packaged goods holding company, currently sports a Zacks Rank #1 (Strong Buy). POST has a trailing four-quarter earnings surprise of 21.4%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Post Holdings’ current financial-year sales and earnings implies growth of 3.1% and 11%, respectively, from the year-ago reported numbers.
Ollie's Bargain Outlet Holdings, Inc. OLLI, a leading off-price retailer of brand-name household products, currently carries a Zacks Rank #2 (Buy). OLLI has a trailing four-quarter earnings surprise of 4.2%, on average.
The Zacks Consensus Estimate for Ollie's Bargain's current financial-year sales and earnings calls for growth of 15.6% and 16.2%, respectively, from the year-ago reported numbers.
Grocery Outlet Holding Corp. GO, an extreme value retailer of quality, name-brand consumables and fresh products, carries a Zacks Rank #2. GO has a trailing four-quarter earnings surprise of 28.2%, on average.
The Zacks Consensus Estimate for Grocery Outlet’s current financial-year sales and earnings suggests growth of 8.3% and 1.3%, respectively, from the year-ago reported numbers.
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This article originally published on Zacks Investment Research (zacks.com).
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