The Kroger Company
), one of the largest grocery retailers, recently posted
fourth-quarter fiscal 2013 earnings of 78 cents a share that
surpassed the Zacks Consensus Estimate of 73 cents, buoyed by its
strategy. However, quarterly earnings fell 11% from 88 cents
earned in the prior-year quarter.
However, excluding the extra week in the prior-year quarter
and other items, earnings jumped 10% from 71 cents earned in the
The Cincinnati-based Kroger now projects fiscal 2014 earnings
in the band of $3.14 to $3.25 per share, including Harris Teeter
transaction that concluded on Jan 28, 2014. The current Zacks
Consensus Estimate for fiscal 2014 is $3.12 and could witness an
uptrend in the coming days.
Total sales (including fuel center sales) dropped 4% to
$23,222 million from the prior-year quarter, and also fell short
of the Zacks Consensus Estimate of $23,280 million. Excluding the
extra week in the prior-year quarter, total sales jumped 4.8%.
Management stated that excluding fuel center sales and the extra
week in the year-ago period, total sales rose 4.4%.
Identical supermarket sales (stores that are open without
expansion or relocation for five full quarters) excluding fuel
center sales, grew 4.3% to $17,971 million.
Kroger now projects identical supermarket sales (excluding
fuel) growth of 2.5% to 3.5% for fiscal 2014.
Including fuel center sales, identical supermarket sales
jumped 4% to $21,039 million. We believe that Kroger's dominant
position enables it to expand store base and boost market
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 and margins.
Operating income declined 12% year-over-year to $718 million,
whereas operating margin contracted 30 basis points to 3.1%.
Kroger ended the quarter with cash of $260 million, total debt
of $11,309 million, reflecting a debt-to-capitalization ratio of
approximately 68%, and shareholders' equity of $5,395 million.
Net debt increased $2,265 million from the prior-year period due
to Harris Teeter transaction.
Trailing-twelve months' net total debt to adjusted EBITDA
ratio was 2.43 compared with 2.04 in the prior-year period.
Return on invested capital on a rolling four quarters basis was
13.4%, in line with the prior-year period.
Total capital expenditures during fiscal 2013 aggregated $2.3
billion. Management anticipates capital investments between $2.8
and $3 billion for fiscal 2014.
During fiscal 2013, Kroger bought back 16.1 million shares for
an aggregate amount of $609 million. The company's healthy free
cash flow generating ability has facilitated it to return over
$928 million to stakeholders via dividends and share repurchases
in fiscal 2013.
The company currently operates 2,640 supermarkets and
multi-department stores in 34 states under approximately 24 local
banners. We believe that the company's strong corporate and
national brands helped it gain customer loyalty.
Currently, Kroger's shares maintain a Zacks Rank #3 (Hold).
Other better ranked stocks worth considering in the retail sector
Diamond Foods, Inc.
The Hain Celestial Group, Inc.
Spartan Stores Inc.
), all sporting a Zacks Rank #2 (Buy).
DIAMOND FOODS (DMND): Free Stock Analysis
HAIN CELESTIAL (HAIN): Free Stock Analysis
KROGER CO (KR): Free Stock Analysis Report
SPARTAN STORES (SPTN): Free Stock Analysis
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