Kroger shares rise as Q2 earnings beat estimates, guidance raised

Investing.com -- Kroger Co. reported second-quarter earnings that exceeded analyst expectations, driven by strong identical store sales growth and improved margins, prompting the grocery chain to raise its full-year outlook.

The company posted adjusted earnings per share of $1.04 for the quarter, surpassing the analyst estimate of $0.99. Revenue came in at $33.9 billion, slightly below the consensus estimate of $34.05 billion. Identical sales without fuel increased 3.4% YoY, significantly higher than the 1.2% growth recorded in the same period last year.

Kroger shares rose 1.5% following the announcement as investors responded positively to the earnings beat and improved guidance.

"Kroger delivered another quarter of strong results, which demonstrates the clear and measurable progress we’ve made on our priorities – to simplify our organization, to improve the customer experience and to focus on work that creates the most value," said Chairman and CEO Ron Sargent.

The company’s gross margin improved to 22.5%, up from 22.1% in the same quarter last year, primarily due to the sale of Kroger Specialty Pharmacy, lower supply chain costs, and reduced shrink. E-commerce sales grew 16% during the quarter, highlighting the company’s successful digital transformation efforts.

CFO David Kennerley noted, "Sales growth has been strong, led by pharmacy, eCommerce and Fresh, and we are encouraged by the improvement in grocery volumes."

Kroger raised its full-year identical sales growth guidance to 2.7%-3.4%, up from the previous range of 2.25%-3.25%. The company also increased the lower end of its adjusted operating profit forecast to $4.8-$4.9 billion from $4.7-$4.9 billion previously, and now expects full-year adjusted EPS of $4.70-$4.80, compared to its earlier projection of $4.60-$4.80. The midpoint of the new EPS guidance range ($4.75) is slightly below the analyst consensus of $4.78.