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Kroger Crashes on Fiscal 1Q18 Results

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Kroger Crashes on Fiscal 1Q18 Results PART 1 OF 5

Kroger Beats Fiscal 1Q18 Revenue Estimates, Meets Earnings

Series overview

Cincinnati-based Kroger (KR) reported financial results for fiscal 1Q18 on June 15, 2017. The results relate to the three-month period ending May 20, 2017. The company reported in-line earnings and delivered better-than-consensus top-line forecasts.

Kroger’s EPS (earnings per share) stood at $0.48, down 17.1% YoY (year-over-year). Total revenue improved 4.9% YoY to $36.3 billion, which was $520 million more than the average analyst estimate.

Kroger Beats Fiscal 1Q18 Revenue Estimates, Meets Earnings

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The company also revised its full-year EPS guidance to the $2.00–$2.05 range, as compared to the $2.21–$2.25 previously guided and the $2.19 consensus. The revision sent the company’s stock price plummeting 18.8% to close at $24.56 on June 15.

On June 16, the share price tumbled another 9.3%, after J.P. Morgan’s downgrade and the news of Amazon’s bid to buy competitor Whole Foods Market (WFM).

About Kroger

With its trailing-12-month sales of $117 billion, Kroger is the largest US supermarket chain and one of the world’s largest grocery retailers, surpassed only by Wal-Mart Stores (WMT). Kroger operates 2,792 supermarket stores, 311 fine jewelry stores, and 782 convenience stores in 35 states in the US.

Kroger has a market capitalization of $22.4 billion (as of June 15, 2017). The company is a component of the S&P 500 Index (SPX) and the S&P 500 Food & Staples Retail Index. It constitutes 3.9% of the VanEck Retail ETF (RTH).

Valuations overview

Kroger is currently trading at a one-year forward PE (price-to-earnings) ratio of 11.3x, as compared to its three-year average of 16.5x.

The company trades at a discount to most peers. Natural and organic food competitors Whole Foods Market (WFM) and Sprouts Farmers Market (SFM) are valued at PE ratios of 25x and 24.5x, respectively. Kroger is also cheaper than Walmart, Target (TGT), and Costco Wholesale (COST), which are now trading at 18x, 13.1x, and 28.9x, respectively.

In this five-part series on Kroger’s 1Q18 results (continue below), we’ll discuss the company’s key drivers and profitability, stock market performance, valuations, and Wall Street’s take on the stock.

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