[ACCESSWIRE]
LONDON, UK / ACCESSWIRE / September 14, 2016 / Active Wall St. announces its post-earnings coverage on The Kroger Co. Earnings (NYSE: KR). The company posted its second quarter fiscal 2016 earnings results on September 9th, 2016. The largest supermarket chain by sales in US reported earnings that topped forecast; however the company slashed its full-year guidance citing deflationary pressures. Register with us now for your free membership at: http://www.activewallst.com/register/.
Today, AWS is promoting its earnings coverage on KR; touching on stocks like Sprouts Farmers Market Inc. (NASDAQ: SFM) and SUPERVALU Inc. (NYSE: SVU). Get our free coverage by signing up to:
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Earnings Reviewed
For the quarter ended on 13th, August, 2016, Kroger reported earnings of $383 million, or $0.40 per share, down from $433 million, or $0.44 per share, a year earlier. Excluding charges related to the pension obligation restructuring, adjusted earnings increased to $0.47 per share, topping estimates for $0.45 per share. Revenue rose 4% to $26.57 billion from $25.54 billion in Q2 FY15, marginally below analysts' forecasts of $26.7 billion.
Chairman and CEO Rodney McMullen commented:
"I'm very proud of our associates for their determined focus on always making a difference for our customers. Their execution of our Customer 1st Strategy in a deflationary environment helped deliver growth in identical store sales, units and market share."
Comps
During the reported quarter Kroger's stated that excluding fuel center sales, total sales rose 7.3%, while excluding Roundy's, total sales without fuel rose 2.9%. The company's identical supermarket sales (stores that are open without expansion or relocation for five full quarters), excluding fuel center sales, grew 1.7% to $21.26 billion, whereas including fuel center sales, identical supermarket sales edged down 0.5% to $23.94 billion. The company noted that same store sales were impacted by deflation across most departments with the exception of produce and pharmacy. The company noted that it has observed significant deflation in milk, eggs and cheese.
Deflationary Environment Hurting Retailers
Most of the retailers are suffering from yearlong deflationary pressures in commodity and uncertainty in economic climate. Kroger stated that it has observed gradual tightening of budgets and that its customers are less confident about the economy now than they were three months ago, and expect the economy to get worse in the next three months. On September 07th, 2016, Sprouts Farmers Market noted that it is expecting comparable store sales growth for the third quarter to be approximately flat, due to prolonged deflationary environment, competitive landscape and industry dynamics, which prompted heavy promotions across the industry, adversely impacting retail deflation and traffic generation. On September 08th, 2016, SUPERVALU Inc. lowered its full-year outlook, citing competition and deeper levels of deflation as well as lower levels of supplemental nutrition assistance program food prices.
Financials
Kroger noted that during the last year it has utilized free cash flow to repurchase $1.1 billion of common shares, pay $406 million in dividends, invest $3.8 billion in capital, and merge with Roundy's for $866 million. Return on invested capital for Q2 FY16 was 13.95%, excluding Roundy's, compared to 14.24% for Q2 FY15. Kroger, ended the quarter with cash of $319 million and total debt of $12.42 billion. Total debt increased $1,150 million from the prior-year period.
Outlook
Kroger cut its full-year earnings-per-share outlook to $2.03-$2.13 per share, or $2.10-$2.20 per share excluding new pension obligations. The forecast was below Wall Street's expectations for $2.21 per share. The company lowered its forecast for full-year same-store sales growth excluding fuel to a range of 1.4% to 1.8%. That is down from its prior range of 2.5% to 3.5%, and compares to the average 5% growth over the past two years. The company also cut its expected capital investments, excluding mergers and other costs, to $3.6 billion to $3.9 billion for the year, down from an earlier outlook for $4.1 billion to $4.4 billion.
Stock Performance
Kroger's stock is trading slightly up by 0.19%, closing Tuesday's session at $30.95. A total trading volume of 14.35 million shares have been exchanged, which was higher than the 3 months average volume of 10.26 million shares. The company's shares have a PE ratio of 14.49 and a dividend yield of 1.55%.
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