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Evaluating Kroger’s Fiscal 1Q17 before It Posts Its 2Q17 Results

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Top line growth in fiscal 1Q17

Kroger (KR) reported its 1Q17 earnings on June 16, 2016. The company’s revenue inched 4.7% higher to $34.7 billion for the three months ended on May 21, 2016.

Volatile fuel prices continued to weigh on the company’s top line. Excluding fuel sales, the company’s revenue rose by 7.8%.

The company’s top line growth was better than those of its competitors Whole Foods Market (WFM), Walmart (WMT), and Costco (COST), which saw their sales rise by 2%, 0.9%, and 2.6%, respectively, during their last reported quarters.

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Sales comps registered a slowdown

Though Kroger saw healthy top line growth, its sales comps registered the slowest growth in the last 25 quarters. Its identical store sales rose by 2.4% during the quarter as trips per household rose but units per basket fell.

The company is facing low inflation and deflation headwinds, which have negatively impacted its sales comps over the last couple of quarters.

Earnings per share

Earnings per diluted share stood at $0.70, a rise of 12.9% compared to the same period last year. Earnings got a boost from the company’s strong operating results and higher fuel margins. A lower LIFO (last in, first out) expense and share buybacks also contributed to EPS (earnings per share) growth.

To know about the company’s guidance for fiscal 2017, read on to the next article.

Balance sheet status as of 1Q17

Kroger’s net total debt-to-adjusted-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio rose to 2.12x compared to 2.09x during the same period last year.

The company’s capital expenditure-to-sales ratio stood at 3.2% in 1Q16 compared to 2.7% in 1Q15, as the company registered a 24% rise in capex during the year.

Investors looking for exposure to Kroger through ETFs can invest in the First Trust Consumer Staples AlphaDEX ETF (FXG). KR makes up 0.74% of FXG.

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