Kroger To Gain Traction From Households And Traffic Growth - Analyst Bullish On Future Sales

Zinger Key Points
  • Kroger's Q1 adjusted earnings of $1.43 per share exceeded expectations, driven by over 8% growth in digital sales.
  • Analysts maintain bullish outlooks on Kroger's future sales growth, citing benefits from digital strategies and household traffic trends.

Telsey Advisory Group analyst Joseph Feldman reiterated the Outperform rating on Kroger Company KR, maintaining the forecast at $62.

The company reported first-quarter adjusted earnings of $1.43 per share, surpassing analyst expectations of $1.34 per share. Kroger’s digital sales grow over 8%, driving quarterly sales to $45.3 billion, slightly exceeding estimates.

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The gross margin increased eight bps to 22.4%, although FIFO gross margin declined 7 bps, due to lower pharmacy margins and higher price investments.

The analyst expressed his bullish sentiments regarding households and traffic growth, which bodes well for future sales.

Feldman also sees the benefits from its Leading with Fresh and Accelerating with Digital strategy to continue.

The company maintained its capex guidance of $3.4 billion -$3.6 billion and adjusted free cash flow guidance of $2.5 billion-$2.7 billion. Given the strong results, the analyst projected positive revisions ahead. Feldman’s estimates are under review.

Meanwhile, Evercore ISI Group analyst Michael Montani maintains Kroger with an Outperform, lowering the price forecast from $61 to $60.

Kroger sees identical sales without fuel 0.25%–1.75%. The company projects adjusted EPS of $4.30-$4.50 for FY24 (consensus $4.43).

The company sees an adjusted free cash flow of $2.5 billion-$2.7 billion, with capital expenditures of $3.4 billion-$3.6 billion.

Price Action:  KR shares are trading lower by 3.35% to $50.24 at last check Thursday.

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