Thursday morning, Kroger (NYSE:
KR
) reported first quarter 2012 earnings per share of $0.78,
exceeding the consensus analyst estimate by $0.06. The grocery
store chain operator effectively matched the consensus analyst
revenue estimate of $29.1 billion.
Kroger released management projections for full year 2012 EPS
that exceeded analyst expectations. Kroger's management projected
2012 earnings per share in the $2.33 to $2.40 range, which fell
entirely higher than analyst expectations of $2.32.
"We were very pleased with the results of the first quarter.
We exceeded our expectations, and as a result raised our earnings
per share guidance for the year," CEO David Dillon said in
Kroger's Q1 earnings release.
Along with earnings, Kroger announced a $1 billion share
repurchase program. Share repurchase programs are often viewed as
a signal that management believes a company's shares are
undervalued. In fact, Kroger management specifically said the
company's stock is "inexpensive" in Thursday's earnings
conference call.
Before Thursday's release, Kroger had beaten consensus analyst
expectations for each of the previous four quarters. Despite
these results, shares of Kroger were trading approximately 4%
lower than they were 12 months ago. The S&P 500 Index was up
about 4% during the same period.
Kroger has a quarterly dividend of $0.12. On the call,
management said that they see the dividend growing in the
future.
Following Thursday's news, shares of Kroger traded more than
4% higher for the day.
Other Kroger News
Kroger has been pursuing a "Customer 1st" strategy aimed at
improving customers' shopping experiences. Consistent with this
strategy, Kroger announced in March that it would stop selling
"Lean Finely Textured Beef." This beef had been widely known as
pink slime, a modified form of beef that received negative
attention from consumers.
Monday, Reuters
reported
that Kroger would release its own individual sized coffee packs
for use in Keurig coffee makers. Green Mountain Coffee Roasters
(NASDAQ:
GMCR
) produces Keurig coffee makers, but generates a substantial
portion of its profit from selling K-Cups. Kroger-brand coffee
packs could be a lower priced substitute for K-Cups, negatively
influencing Green Mountain's bottom line. Thursday, Green
Mountain was trading more than 10% lower than its Monday
open.
Competitor Comparisons
Whole Foods Market (NASDAQ:
WFM
), a natural and organic food retailer traded higher Thursday
after Kroger's earnings release. Investors might construe
Kroger's Q1 success as a positive sign for grocery spending in
general. Alternatively, investors might interpret this success as
a sign that consumers attempted to save money by purchasing food
at Kroger, rather than more expensive stores like Whole
Foods.
On May 2nd, Whole Foods reported adjusted earnings per share
that exceeded analyst expectations and raised management
projections for full year 2012 earnings per share. For reference,
Whole Foods is trading at a price-to-earnings (P/E) ratio near
41, while Kroger has a P/E ratio closer to 23.
Discount retailer SuperValu (NYSE:
SVU
) also traded higher after Kroger's Q1 earnings release. The
company has a dividend yield near 7.7%, as compared to Kroger's
2.1% yield and Whole Food's 0.6% yield. On April 10, SuperValu
released Q4 2012 adjusted EPS and full year 2013 management EPS
projections that exceeded analyst expectations.
Bloomberg
reported
Thursday that SuperValu might attract private equity buyers on
the basis of the company's free cash flow. SuperValu traded more
than 40% lower year to date.
Disclosure: At the time of this writing, I did not own
shares of any companies mentioned in this post.
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.