The Kroger Company
), one of the largest grocery retailers and an S&P 500
company, is slated to report its third-quarter 2012 financial
results on Thursday, November 29, 2012.
The current Zacks Consensus Estimate for the quarter is pegged
at 43 cents a share, which reflects a growth of 30.3% from the
prior-year quarter's earnings. The current Zacks Consensus
estimates range between a low of 41 cents and a high of 48 cents
a share. The Zacks Consensus estimates third-quarter revenue to
come in at $21,671 million.
Recap of Second-Quarter 2012
Kroger's quarterly earnings of 51 cents a share beat the Zacks
Consensus Estimate by a couple of cents, and rose 24.4% from 41
cents earned in the prior-year quarter. Share repurchase
activities provided cushion to the bottom line. The prior-year
quarter earnings exclude tax benefit
Total revenue (including fuel center sales) climbed 3.9% to
$21,726.4 million from the prior-year quarter, but fell short of
the Zacks Consensus Estimate of $21,983 million.
Excluding fuel center sales, total revenue rose 3.8% and
identical supermarket sales (stores that are open without
expansion or relocation for five full quarters) grew 3.6% to
$16,268.8 million, marking the 35th successive quarter of
increase. Including fuel center sales, identical supermarket
sales jumped 3.6% to $19,443.1 million.
During its last earnings call, Cincinnati-based Kroger raised
its fiscal 2012 earnings outlook. Management now expects fiscal
2012 earnings between $2.35 and $2.42 per share, up from a range
of $2.33 to $2.40 forecasted earlier.
Kroger, which faces stiff competition from
Wal-Mart Stores Inc.
Whole Foods Market Inc.
), reiterated its identical supermarket sales (excluding fuel)
growth guidance of 3% to 3.5% for fiscal 2012. Management expects
to accomplish upper end of the forecasted range.
Zacks Agreement & Magnitude
The Zacks Consensus Estimate did not show any movement in the
last 7 and 30 days, as the downward 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 raised their estimates.
Positive Earnings Surprise History
With respect to earnings surprises, Kroger has topped the
Zacks Consensus Estimates over the last four quarters in the
range of 2% to 8.3%. The average remained at 5.2%, suggesting
that Kroger has outpaced the Zacks Consensus Estimate by the same
magnitude in the trailing four quarters.
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
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
remodels, 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 continues to expect fiscal 2012 capital expenditures
to be 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
Kroger ended second-quarter 2012 with a long-term debt
(including obligations under capital leases and financial
obligations) of $8,126.6 million, reflecting a
debt-to-capitalization ratio of 68.2%, 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 Neutral recommendation on the
stock. Moreover, Kroger's shares maintain a Zacks #3 Rank that
translates into a short-term Hold rating.
KROGER CO (KR): Free Stock Analysis Report
SUPERVALU INC (SVU): Free Stock Analysis
WHOLE FOODS MKT (WFM): Free Stock Analysis
WAL-MART STORES (WMT): Free Stock Analysis
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