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Will Kroger’s First-Quarter Sales Surpass Expectations?

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Jun. 19 2019, Updated 11:04 a.m. ET

Weak sales trend

Kroger’s (KR) sales growth has been deteriorating for the past four quarters. In the fourth quarter of fiscal 2018, which ended on February 2, 2019, Kroger’s sales fell 9.5% to $28.1 billion and lagged analysts’ estimate of $28.4 billion. The company’s fiscal 2018 fourth-quarter sales fell due to its divestiture of its convenience store business unit, lower retail fuel prices, and the impact of an additional week in the fourth quarter of fiscal 2017. Excluding fuel, the company’s same-store sales grew 1.9% in the fourth quarter.

Overall, Kroger’s sales fell 1.2% to $121.2 billion in fiscal 2018.

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Sales expectations

Analysts expect Kroger’s sales to fall 0.8% to $37.2 billion in the first quarter of fiscal 2019, which ended on May 4. Analysts expect Kroger’s fiscal 2019 sales to rise 1.6% to $123.1 billion.

Rival Walmart’s (WMT) revenue rose 1.0% to $123.9 billion in the first quarter of fiscal 2020, which ended on April 30. Walmart’s top line growth was the result of strong same-store sales growth in the US and impressive growth in US e-commerce sales partially offset by lower international sales.

Kroger expects its fiscal 2019 identical sales excluding fuel to grow in the range of 2.0%–2.25%. The company’s growth initiatives to boost its sales include expanding its stores and online assortments, investing in online capabilities to boost e-commerce sales, and making strategic deals to improve its customer traffic. In fiscal 2018, Kroger introduced 1,022 items under its private labels. The sales of Kroger’s Simple Truth brand grew 15.3% to $2.3 billion in the year.

However, the pressure to keep prices competitive will likely affect Kroger’s performance.

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