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The Kroger Co. KR reported fourth-quarter fiscal 2025 results, wherein the bottom line surpassed the Zacks Consensus Estimate and improved year over year. The company also delivered modest sales growth during the quarter, though the top line fell short of the consensus mark. The performance benefited from solid identical sales growth, strong momentum in e-commerce and pharmacy, and improved gross margins supported by sourcing efficiencies and lower supply-chain costs.
Kroger reported adjusted earnings of $1.28 per share, which surpassed the Zacks Consensus Estimate of $1.20 and increased from $1.14 reported in the year-ago quarter. On a GAAP basis, earnings per share came in at $1.35 compared with 90 cents in the prior-year quarter.
Total sales for the quarter stood at $34,725 million, up from $34,308 million in the year-ago period but came below the Zacks Consensus Estimate of $35,107 million. Excluding fuel, sales advanced 2.1% year over year, supported by continued strength in pharmacy and digital channels.
Identical sales without fuel increased 2.4% year over year, reflecting steady customer demand and improved market share trends. Adjusted e-commerce sales jumped 20% year over year, highlighting Kroger’s continued investments in digital capabilities and omnichannel fulfillment.
The Kroger Co. price-consensus-eps-surprise-chart | The Kroger Co. Quote
Gross margin expanded to 23.1% from 22.7% in the year-ago quarter. The increase was primarily driven by sourcing improvements, lower supply-chain costs, improved fuel margins and reduced shrinkage. However, these gains were partly offset by price investments and the mix impact from higher pharmacy sales, which generally carry lower margins. The FIFO gross margin rate, excluding rent, depreciation, amortization and fuel, remained flat year over year.
The operating, general and administrative rate, excluding fuel and adjustment items, increased 21 basis points due to labor investments and cycling prior-year real estate gains, partly offset by improved productivity and lower incentive plan costs.
Adjusted FIFO operating profit totaled $1,206 million, up from $1,174 million in the year-ago quarter. GAAP operating profit came in at $1,246 million compared with $912 million in the same quarter last year.
Kroger ended fiscal 2025 with cash and temporary cash investments of $3,334 million. Total debt stood at $17,554 million, while shareowners’ equity totaled $5,936 million.
Kroger generated net cash provided by operating activities of $7,273 million in fiscal 2025 compared with $5,794 million in the prior year. Free cash flow totaled $3,418 million, up from $1,777 million reported a year ago. On an adjusted basis, adjusted free cash flow came in at $3,868 million, increasing from $2,499 million in fiscal 2024.
The company’s net total debt-to-adjusted EBITDA ratio was 1.76, slightly lower than 1.79 in the prior year and comfortably below the company’s targeted range of 2.30-2.50, reflecting strong financial flexibility.
During fiscal 2025, the company completed its $7.5 billion share repurchase authorization, including a $5 billion accelerated share repurchase program and $2.5 billion in open-market buybacks. The board approved a new $2 billion share repurchase authorization, which is expected to be completed by the end of fiscal 2026.
Kroger expects identical sales growth without fuel between 1% and 2%, which includes an estimated 130-basis-point headwind from the Inflation Reduction Act.
The company anticipates FIFO operating profit of $5-$5.2 billion and adjusted earnings in the range of $5.10-$5.30 per share for fiscal 2026. Kroger also expects free cash flow of $2.7-$2.9 billion, and capital expenditures between $3.8 billion and $4 billion.
Shares of this Zacks Rank #4 (Sell) company have risen 6.6% over the past year compared with the industry’s growth of 33.6%.
Mama's Creations, Inc. MAMA manufactures and markets fresh deli-prepared foods in the United States. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Mama's Creations’ current financial-year sales and earnings indicates growth of 39.9% and 44.4%, respectively, from the prior-year reported levels. MAMA delivered a trailing four-quarter earnings surprise of 133.3%, on average.
Costco Wholesale Corporation COST, which operates membership warehouses, currently carries a Zacks Rank #2 (Buy). COST has an average trailing four-quarter earnings surprise of 0.5%.
The Zacks Consensus Estimate for Costco’s current financial-year sales and EPS calls for growth of 8.1% and 12.4%, 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. OLLI has an average trailing four-quarter earnings surprise of 5.2%.
The Zacks Consensus Estimate for OLLI’s current financial-year sales and EPS suggests growth of 16.8% and 17.7%, 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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