Kroger Lowers Fiscal 2017 Guidance a Second Time on Deflation


Dec. 7 2016, Updated 8:05 a.m. ET

Kroger cuts fiscal 2017 outlook—again

After meeting with challenges in fiscal 3Q17, Kroger (KR) lowered its fiscal 2017 guidance. We should note that the company did the same after its fiscal 2Q17 results as well.

The company now expects its fiscal 2017 adjusted EPS (earnings per share) to be in the $2.10–$2.15 range, as compared to the $2.10–$2.20 guided earlier and the $2.19–$2.28 guided at the beginning of the year. Wall Street’s fiscal 2017 forecasts for the company are in line with the management’s guidance. The consensus is looking for a 2.7% YoY increase in earnings to $2.12 per share.

For the next fiscal year, Kroger’s management foresees its earnings growth to again fall short of its long-term goal of 8%–11% growth. While it does not expect any improvements in the operating environment in the first half, the second half is likely to bring some respite.

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Kroger’s next twelve months next to peers

Kroger is likely to have the smoothest sail through the current deflationary cycle. The company’s earnings per share are predicted to grow 3.6% over the next twelve months.

By comparison, Whole Foods Market (WFM) and Supervalu (SVU) are likely to see falls of 6.7% and 0.3%, respectively, in their earnings over the next year. Wal-Mart (WMT) and Target (TGT) are also predicted to see EPS declines of 6.7% and 1%, respectively.

Kroger’s management on long-term goals

Kroger’s management is confident about the company’s strategy and continues to focus on the bigger picture. Chief Executive Officer Rodney McMullen stated: “I am proud of our associates for continuing to connect with our customers in a difficult operating environment. Deflation persisted as we expected during the quarter.”

McMullen added the following: “We are firmly focused on our long-term strategy of improving our connection with customers and associates, and continue working on process changes to lower costs. We don’t change our strategy based on quarterly swings in results. We remain committed to delivering on our long-term earnings per share growth rate guidance.”

Investors looking for exposure to Kroger through ETFs can consider the Van Eck Retail ETF (RTH), which invests 4.3% of its total holdings in the company.

Continue to the next and final part for a look at Kroger’s stock market performance and Wall Street’s view.


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