The Kroger Company
), one of the largest grocery retailers, recently posted
better-than-expected second-quarter 2012 results on the back of
strategy and effective cost management.
The 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
Healthy results prompted management to raise the outlook. The
Cincinnati-based Kroger now envisions fiscal 2012 earnings between
$2.35 and $2.42 per share, up from a range of $2.33 to $2.40
forecasted earlier. Management expects to attain higher end of the
The current Zacks Consensus Estimate for fiscal 2012 is $2.38
per share that dovetails with management earnings outlook.
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.
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.
Including fuel center sales, identical supermarket sales jumped
3.6% to $19,443.1 million. We believe that Kroger's dominant
position enables it to sustain top-line growth, expand store base
and boost market share.
Kroger's customer-centric business model provides a strong value
proposition to consumers. It is well positioned to continue its
growth momentum primarily through identical supermarket sales
However, Kroger is not immune to the tough economic environment.
The intensifying price war among grocery stores to lure
budget-constrained consumers may adversely impact Kroger's sales
Kroger ended the quarter with cash of $234.9 million, temporary
cash investments of $3.4 million, and total debt of $8,126.6
million, reflecting a debt-to-capitalization ratio of 68.2%, and
shareholders' equity of $3,793.2 million.
Net debt increased $1,236.9 million from the prior-year period.
Trailing-twelve months' net total debt to adjusted EBITDA ratio was
1.96 compared with 1.71 in the prior-year period.
Capital investment, exclusive of acquisitions and purchases of
leased facilities, aggregated $444.7 million for the quarter.
During the quarter, Kroger bought back 23.7 million shares for
an aggregate amount of $525 million. The company's healthy free
cash flow generating ability has facilitated it to return over $1.9
billion to stakeholders via dividends and share repurchases in the
trailing four quarters.
The company currently operates 2,425 supermarkets and
multi-department stores in 31 states under approximately 24 local
banners. Currently, we have a long-term Neutral recommendation on
However, Kroger's shares maintain a Zacks #2 Rank that
translates into a short-term Buy rating, and well defines the
company's healthy results and upbeat guidance.
KROGER CO (KR): Free Stock Analysis Report
WHOLE FOODS MKT (WFM): Free Stock Analysis
WAL-MART STORES (WMT): Free Stock Analysis
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