The Kroger Company
), one of the largest grocery retailers and an S&P 500 company,
is slated to report its second-quarter 2012 financial results on
Friday, September 7, 2012.
The current Zacks Consensus Estimate for the quarter is pegged
at 49 cents a share, which reflects a growth of 19.5% from the
prior-year quarter's earnings. The current Zacks Consensus
estimates range between a low of 46 cents and a high of 53 cents a
share. The Zacks Consensus estimates second-quarter revenue to come
in at $21,983 million.
Recap of First-Quarter 2012
Kroger's quarterly earnings of 78 cents a share beat the Zacks
Consensus Estimate of 72 cents, and rose 11.4% from 70 cents earned
in the prior-year quarter.
Total revenue (including fuel center sales) climbed 5.8% year on
year to $29,064.8 million, but fell short of the Zacks Consensus
Estimate of $29,194 million.
Excluding fuel center sales, total revenue rose 4.3% and
identical supermarket sales (stores that are open without expansion
or relocation for five full quarters) climbed 4.2% to $21,652.7
million, marking the 34
successive quarter of increase. Including fuel center sales,
identical supermarket sales jumped 5.5% to $26,100.6 million.
During its last earnings call, Cincinnati-based Kroger raised
its fiscal 2012 earnings outlook. Management now expects fiscal
2012 earnings between $2.33 and $2.40 per share, up from a range of
$2.28 to $2.38 forecasted earlier.
Kroger, which faces stiff competition from
Wal-Mart Stores Inc.
Whole Foods Market Inc.
), also predicted identical supermarket sales (excluding fuel)
growth between 3% to 3.5% for fiscal 2012, including the
anticipated adverse impact from prescription drugs coming off
Zacks Agreement & Magnitude
The Zacks Consensus Estimate did not show any movement in the
last 7 and 30 days, as the revisions made by 1 of 18 analysts
covering the stock in the said time frame did not have a material
impact. None of the analysts lowered their estimates.
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 8.3%. The average remained
at 3%, suggesting that Kroger has outpaced the Zacks Consensus
Estimate by the same magnitude 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 third and fourth
quarters it beat the Estimate by 6.5% and 2%, respectively. In the
first quarter of fiscal 2012, the earnings topped the Zacks
Consensus Estimate by 8.3%.
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 help win customer 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
) 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
Kroger ended first-quarter 2012 with a long-term debt (including
obligations under capital leases and financial obligations) of
$8,105.9 million, reflecting a debt-to-capitalization ratio of
66.6%, which is substantially higher, and could adversely affect
the company's credit worthiness and make it more susceptible to
macro-economic factors and competitive pressures.
Currently, we have a long-term 'Neutral' recommendation on the
stock. However, Kroger's shares maintain a Zacks #2 Rank that
translates into a short-term 'Buy' rating.
KROGER CO (KR): Free Stock Analysis Report
SUPERVALU INC (SVU): Free Stock Analysis Report
WHOLE FOODS MKT (WFM): Free Stock Analysis
WAL-MART STORES (WMT): Free Stock Analysis
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