The Kroger Company
), one of the largest grocery retailers, recently posted
better-than-expected first-quarter fiscal 2013 results on the
back of Customer 1
strategy. The quarterly earnings of 92 cents a share beat the
Zacks Consensus Estimate of 88 cents, and surged from 78 cents
earned in the prior-year quarter. Share repurchase activities
also provided cushion to the bottom line.
Healthy results prompted management to provide an upbeat
outlook. The Cincinnati-based Kroger now envisions fiscal 2013
earnings between $2.73 and $2.80, up from a range of $2.71 to
$2.79 per share forecasted earlier. The current Zacks Consensus
Estimate for fiscal 2013 is $2.77 per share, and is a subject of
upward revision in the near term.
Total sales (including fuel center sales) climbed 3.4% to
$30,043 million from the prior-year quarter, but fell short of
the Zacks Consensus Estimate of $30,232 million.
Excluding fuel center sales, total sales rose 3.8% and
identical supermarket sales (stores that are open without
expansion or relocation for five full quarters) grew 3.3% to
$22,412 million, marking the 38th successive quarter of
Kroger reiterated its identical supermarket sales (excluding
fuel) growth of 2.5% to 3.5% for fiscal 2013.
Including fuel center sales, identical supermarket sales
jumped 2.9% to $26,945 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 8% year-over-year to $879 million
due to top-line growth and decline in rent, whereas operating
margin expanded 10 basis points to 2.9%. Adjusted EBITDA grew
5.2% to $4,292 million, whereas EBITDA margin increased 30 basis
points to 14.3%.
Kroger ended the quarter with cash of $247 million, total debt
of $7,946 million, reflecting a debt-to-capitalization ratio of
63.4%, and shareholders' equity of $4,596 million. Net debt
increased $160 million from the prior-year period.
Trailing-twelve months' net total debt to adjusted EBITDA
ratio was 1.85 compared with 1.91 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 $646
million. Management maintained its capital investments projection
of $2.1 billion to $2.4 billion for fiscal 2013.
During the quarter, Kroger bought back 4.5 million shares for
an aggregate amount of $146 million. The company's healthy free
cash flow generating ability has facilitated it to return over
$1.3 billion to stakeholders via dividends and share repurchases
in the last four quarters.
The company currently operates 2,419 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 streak of posting positive earnings
surprises. Other stocks worth considering in the retail sector
Flowers Foods, Inc.
Bon-Ton Stores Inc.
) all of which carry a Zacks Rank #1 (Strong Buy). All these
companies are expected to continue with their upbeat
BON-TON STORES (BONT): Get Free Report
CONNS INC (CONN): Free Stock Analysis Report
FLOWERS FOODS (FLO): Free Stock Analysis
KROGER CO (KR): Free Stock Analysis Report
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