Kroger (KR) reported its third-quarter earnings on December 6. For the quarter ended on November 10, Kroger (KR) posted an adjusted EPS of $0.48 on revenues of $27.67 billion, outperforming analysts’ EPS expectation of $0.43 and revenue estimate of $27.66 billion. The company’s alternative revenue streams, Kroger Personal Finance and Kroger Precision Marketing, posted strong performance for the quarter. However, the company’s same-store sales growth stood at 1.6%—slightly lower than analysts’ expectation of 1.7%.
Kroger’s management credited the company’s early execution of the Restock Kroger initiative for its better-than-expected third-quarter earnings. The strong third-quarter earnings and 60% growth in the company’s digital sales appear to have increased investors’ confidence, which led the company’s stock price to rise to a high of $30.40 on December 14. However, since then, the company’s stock has fallen due to weakness in the broader equity market. As of December 27, the company was trading at $27.38, which represents a fall of 9.9% from the highs of December 14.
Year-to-date, Kroger’s stock has returned -0.3%. Peers Target (TGT) and Walmart (WMT) have returned -0.8% and -7.3%, respectively. The broader comparative index, the First Trust Consumer Staples AlphaDEX ETF (FXG), which invests 24.2% of its holdings in grocery and drug store companies, has declined 5.5%.
Next in this series, we’ll look at analysts’ recommendations for Kroger and its valuation multiple.