The Kroger Company
(
KR
), one of the largest grocery retailers and an S&P 500 company,
is slated to report its first-quarter 2012 financial results on
Thursday, June 14, 2012.
The current Zacks Consensus Estimate for the quarter is pegged
at 72 cents a share, which reflects a growth of 2.9% from the
prior-year quarter's earnings. The current Zacks Consensus
estimates range between a low of 71 cents and a high of 75 cents a
share. The Zacks Consensus estimates first-quarter revenue to come
in at $29,201 million.
Recap of Fourth-Quarter 2011
Kroger's quarterly earnings of 50 cents a share inched past the
Zacks Consensus Estimate by a penny, and rose 8.7% from 46 cents
earned in the prior-year quarter.
Total revenue (including fuel center sales) climbed 7.7%
year-on-year to $21,405.8 million, but it fell short of the Zacks
Consensus Estimate of $21,415 million.
Excluding fuel center sales, total revenue rose 5% and identical
supermarket sales (stores that are open without expansion or
relocation for five full quarters) climbed 4.9% to $16,525.3
million. Including fuel center sales, identical supermarket sales
jumped 7.1% to $19,264.7 million.
Management Guided
During its last earnings call, Cincinnati-based Kroger
forecasted fiscal 2012 earnings between $2.28 and $2.38 per
share.
Kroger, which faces stiff competition from
Wal-Mart Stores Inc.
(
WMT
) and
Whole Foods Market Inc.
(
WFM
), also predicted identical supermarket sales (excluding fuel)
growth of 3% to 3.5% for fiscal 2012, including the anticipated
adverse impact from prescription drugs coming off patent.
Zacks Agreement & Magnitude
With 1 out of the 19 analysts covering the stock downwardly
revising the estimate for the first quarter, the Zacks Consensus
Estimate dropped by a penny in the last 30 days. In the last 7
days, one analyst lowered the estimate, but that did not have any
impact on the Estimate. Over the last 7 and 30 days, none of the
analysts revised their estimates upward.
Mixed Earnings Surprise History
With respect to earnings surprises, Kroger has missed as well as
topped the Zacks Consensus Estimates over the last four quarters in
the range of negative 4.7% to positive 9.4%. The average remains at
positive 3.3%. This suggests that Kroger has outperformed the Zacks
Consensus Estimate by an average of 3.3% in the trailing four
quarters.
In the second quarter of fiscal 2011, the earnings missed the
Zacks Consensus Estimate by 4.7%, whereas in the fourth, third and
first quarters it beat the Estimate by 2%, 6.5% and 9.4%,
respectively.
Let's Conclude
A dominant position among the nation's largest grocery retailers
enables Kroger to sustain growth in the top line, expand its store
base and boost its market share. The company's strong corporate and
national brands win customers' loyalty.
The company's customer-centric business model provides a strong
value proposition to consumers, and positions it well to deliver
higher earnings, primarily through strong identical supermarket
sales growth (sans fuel).
Management continues to deploy capital to concentrate more on
remodeling, merchandising and other viable projects. These include
nearly 40 to 50 major capital projects comprising opening of new
stores, expansions and relocations, and 125 to 140 remodels.
Management expects fiscal 2012 capital expenditures in the range of
$1.9 billion to $2.2 billion.
The grocery business is highly competitive and fragmented, and
Kroger faces intense competition from big players, like
Supervalu Inc.
(
SVU
) as well as other conventional and specialty gourmet retailers
with respect to price, store expansion, and promotional activities
to drive traffic. This might dent the company's sales and
margins.
Kroger ended fourth-quarter 2011 with a long-term debt
(including obligations under capital leases and financial
obligations) of $8,164.1 million, reflecting a
debt-to-capitalization ratio of 67.3%, which is substantially
higher, and could adversely affect the company's credit worthiness
and make it more susceptible to the macro-economic factors and
competitive pressures.
Currently, we have a long-term 'Outperform' recommendation on
the stock. However, Kroger's shares maintain a Zacks #4 Rank that
translates into a short-term 'Sell' rating.
KROGER CO (KR): Free Stock Analysis Report
SUPERVALU INC (SVU): Free Stock Analysis Report
WHOLE FOODS MKT (WFM): Free Stock Analysis
Report
WAL-MART STORES (WMT): Free Stock Analysis
Report
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