Kroger Q2 income jumps; raises full-year forecast
The Kroger Company reported a solid second quarter, marked by a 3.4% year-over-year increase in identical sales (excluding fuel) and surging e-commerce sales.
The supermarket giant’s net income increased 30.7% to $609 million for the quarter ended Aug. 14. Adjusted earnings per share of $1.04 topped analysts’ expectations of $0.99 per share.
Total company sales were $33.94 billion, below estimates, compared to $33.91 billion for the same period last year, The total included $718 million from Kroger Specialty Pharmacy sales. Excluding fuel and Specialty Pharmacy, sales increased 3.8% compared to the same period last year.
Identical sales without fuel rose 3.% year over year. E-commerce sales increased 16%, led by “good performance in delivery,” the company said.
"Kroger's second quarter results reflect continued momentum in our business,” said CFO David Kennerley. “Sales growth has been strong, led by pharmacy, e-commerce and fresh, and we are encouraged by the improvement in grocery volumes.”
Gross margin was 22.5% of sales for the second quarter compared to 22.1% for the year-ago period. The improvement in gross margin was primarily attributable to the sale of Kroger Specialty Pharmacy, lower supply chain costs, lower shrink, and decreased fuel sales, partially offset by the mix effect from growth in pharmacy sales, which has lower margins, and price investments.
Based on its results, Kroger said it was raising its identical sales without fuel guidance to a new range of 2.7% to 3.4% from its previous range of 2.25% to 3.25%. It also raised its net earnings per share guidance to $4.70 to $4.80 compared to its previous range of2.25% to 3.25%.
In August, Kroger laid off nearly 1,000 corporate administrative employees throughout its organization. The move came as Kroger implemented structural changes to its administrative teams across the United States in a bid to set the organization up for continued success.
Separately, Kroger said it expects to complete during the current third quarter the $5 billion accelerated stock-repurchase program that it announced during its fiscal fourth quarter. The grocer also said it expects to buy back an additional $2.5 billion worth of stock by the end of the fiscal year.
