05 December 2024
If you are covering Kroger's Q3 results, please see the following comment from Lucy Rumbold, equity research analyst at Quilter Cheviot:
“Kroger, the US retail company which specialises in groceries and pharmacy, reported a relatively good set of Q3 results today, showing a 2.3% increase in like-for-like sales, excluding fuel, and beating estimates by 50 basis points. The company’s earnings per share was relatively in line with expectations at $0.98, and the full-year guidance range has been narrowed.
“Kroger’s sales were driven by strong performance in its pharmacy and digital sectors, with digital sales up 11%, while its ‘Our Brands’ sales growth also outpaced total grocery sales as the company witnessed a boost in household loyalty.
"The company's deliveries, powered by Ocado, saw an 18% sales increase over the past year. This growth was primarily driven by customer fulfilment centres and enhanced Pickup productivity, achieving a record low cost per order. This improvement was supported by the implementation of order batching and routing technology across all stores.
“On a less positive note, however, Kroger’s revenue is down year on year, and came in at 1.5% below consensus estimates due to a combination of the sale of Kroger Specialty Pharmacy and reduced fuel sales from lower average retail prices per gallon compared to last year.
“Nonetheless, the ‘first in, first out’ gross margin increased by 51 basis points, reflecting Kroger’s ability to enhance margins while maintaining competitive pricing. Meanwhile, the ‘last in, first out’ inventory charge decreased by $25 million year on year, largely as a result of lower inflation.
"Kroger also currently awaits the court ruling decision on its merger with Albertsons, which has been delayed due to concerns around reducing competitiveness if the two were to combine. If the deal can go ahead, it could positively impact the company's investment thesis as it would significantly increase its market presence and enhance its competitive edge."
