The Kroger Company
), one of the largest grocery retailers, recently posted
second-quarter fiscal 2013 earnings of 60 cents a share that came
in line with the Zacks Consensus Estimate, and surged from 51
cents earned in the prior-year quarter buoyed by Customer 1
strategy. Share repurchase activities also provided cushion to
the bottom line.
The Cincinnati-based company, Kroger, reiterated its fiscal
2013 earnings of $2.73 to $2.80 per share. The current Zacks
Consensus Estimate dovetails with the company's high-end of the
Total sales (including fuel center sales) climbed 4.6% to
$22,722 million from the prior-year quarter, but fell short of
the Zacks Consensus Estimate of $22,730 million.
Excluding fuel center sales, total sales rose 3.9% and
identical supermarket sales (stores that are open without
expansion or relocation for five full quarters) grew 3.3% to
$16,846 million, marking the 39th successive quarter of
Kroger now projects identical supermarket sales (excluding
fuel) growth of 3% to 3.5% for fiscal 2013, up from previous
forecast of 2.5% to 3.5%.
Including fuel center sales, identical supermarket sales
jumped 4% to $20,287 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 and margins.
Operating income increased 11.2% year-over-year to $595
million due to top-line growth, whereas operating margin expanded
10 basis points to 2.6%.
Kroger ended the quarter with cash of $226 million, total debt
of $7,892 million, reflecting a debt-to-capitalization ratio of
approximately 62%, and shareholders' equity of $4,848 million.
Net debt declined $446 million from the prior-year period.
Trailing-twelve months' net total debt to adjusted EBITDA
ratio was 1.77 compared with 1.96 in the prior-year period.
Return on invested capital on a 52-week, rolling four quarters
basis was 13.5%, up 10 basis points from the prior-year
Total capital expenditures during the quarter aggregated $507
million. Management maintained its capital investments projection
of $2.1 billion to $2.4 billion for fiscal 2013.
During the quarter, Kroger bought back 2.4 million shares for
an aggregate amount of $90 million. The company's healthy free
cash flow generating ability has facilitated it to return over
$920 million to stakeholders via dividends and share repurchases
in the last four quarters.
The company currently operates 2,418 supermarkets and
multi-department stores in 31 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 #2 (Buy), and
well reflects the company's earnings momentum. Other stocks worth
considering in the retail sector include
Citi Trends, Inc.
Fortune Brands Home & Security, Inc.
Lumber Liquidators Holdings, Inc.
), all sporting a Zacks Rank #1 (Strong Buy). All these companies
are expected to continue with their upbeat performances.
CITI TRENDS INC (CTRN): Free Stock Analysis
FORTUNE BRD H&S (FBHS): Free Stock Analysis
KROGER CO (KR): Free Stock Analysis Report
LUMBER LIQUIDAT (LL): Free Stock Analysis
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