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Weak Q2 Results Erase Kroger’s Stock Gains

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Sep. 18 2018, Updated 6:32 a.m. ET

What disappointed investors?

As discussed, Kroger (KR) reported its fiscal Q2 2018 results September 13, beating analysts’ bottom-line estimate but missing their sales expectation. The sales miss was significant for investors, as competitors Walmart (WMT) and Target (TGT) had recently posted strong quarters. While Target recorded its best comps growth in 13 quarters, Walmart’s sales comps were its best in ten years. Kroger, on the other hand, once again missed analysts’ sales comps estimate despite strong macros.

Also, both Walmart and Target raised their fiscal earnings guidance, while Kroger kept its adjusted EPS guidance unchanged at $2.00–$2.15 and its sales growth guidance at 2%–2.5%.

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Investor’s reaction to Q2 results

Kroger’s weak Q2 results and disappointing guidance drove its stock lower, by 9.9% and 2.7% on September 13 and 14, respectively. The stock is now sitting at a YTD (year-to-date) profit of 1.3%.

In comparison, the S&P 500 and the S&P 500 Food and Staples have risen 8.7% and 6.1% this year, and retailers Costco (COST) and Target (TGT) have gained 27% and 35%, respectively. Walmart (WMT), however, has fallen 4.2% YTD, despite delivering a strong quarter recently.

Investors seeking exposure to Kroger could consider the First Trust Consumer Staples AlphaDEX ETF (FXG), which invests 3.7% of its portfolio in the company. Continue to the next part to learn about analysts’ views on Kroger.

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