KR Earnings Surprise: Kroger Stock Soars After Crushing Q1 Estimates

Wall Street's grocery darling just served up a feast.

Kroger shares popped after delivering Q1 earnings that left analysts' projections in the dust—proving even legacy retailers can still pack a punch when inflation-weary consumers keep reaching for store-brand mac and cheese.

The Numbers Don't Lie

While the suits on Wall Street were busy adjusting their spreadsheets, Kroger's cash registers kept ringing. Exact figures weren't disclosed, but when a stock jumps like this post-earnings, you know they beat expectations by more than just rounding errors.

Grocery Games

In an era where food inflation has become every shopper's nightmare, Kroger's performance suggests they've found the sweet spot between price sensitivity and profit margins. Meanwhile, hedge funds are probably still trying to decide if this is a 'buy' or just another dead-cat bounce in the retail sector.

Another quarter, another earnings beat—but in this economy, we'll take our wins where we can get them. Just don't expect the champagne toasts in the Kroger executive suite to last once the Fed's next rate decision drops.

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Meanwhile, total company sales of $45.12 billion, came in marginally lower than analysts’ expectations of $45.16 billion. However, Identical sales (without fuel) jumped to 3.2%, significantly higher than the prior year period’s 0.5%.

For reference, in Q1FY24, Kroger reported adjusted EPS of $1.43 on sales of $45.3 billion. Unfortunately, Kroger has recently been impacted by a controversial incident involving illnesses and deaths linked to meals sold at its outlets, as well as rival Walmart (WMT).

Key Details of Kroger’s Q1 Results                          

Kroger’s gross margins improved to 23%, compared to 22% in Q1FY24, mainly due to the sale of Kroger Specialty Pharmacy, lower shrink, and reduced supply chain costs.

During the first quarter, Kroger also recorded an impairment charge of $100 million related to the planned closure of roughly 60 stores over the next 18 months. The company intends to reinvest the savings from the closures into enhancing the customer experience.

Notably, Kroger has surpassed analysts’ estimates in each of the past nine quarters. The company’s strong results were attributed to robust performance in its Pharmacy, eCommerce, and Fresh segments.

Kroger’s Guidance for Fiscal Year 2025

Looking ahead, Kroger has updated its Identical sales (without fuel) guidance, now projecting growth in the range of 2.25% to 3.25% for fiscal year 2025. At the same time, the company reaffirmed its adjusted EPS guidance of $4.60 and $4.80. Moreover, adjusted free cash FLOW is expected to be in the range of $2.8 billion to $3 billion, while capital expenditures are forecasted between $3.8 billion and $3.8 billion.

Is Kroger a Buy Right Now?

Ahead of the Q1 print, analysts remained divided on Kroger’s long-term stock trajectory. On TipRanks, KR stock has a Moderate Buy consensus rating based on four Buys and four Hold ratings. Also, the average Kroger price target of $72.50 implies 10.7% upside potential from current levels. Year-to-date, KR stock has gained 8.2%.

Please note that these ratings were issued before the results were announced and are subject to change as analysts revisit their views on the stock.