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Kroger (NYSE:KR), the Cincinnati-based grocery giant, reported a swing to profitability in its latest quarter, beating Wall Street's adjusted earnings expectations but falling short in overall sales and profit estimates.
Sales Growth Falls Short of Forecasts
Kroger's total sales for the quarter came in at $33.91 billion, a slight 0.2% increase from the same period last year. However, this fell short of the $34.09 billion consensus forecast from analysts polled by FactSet. The modest revenue growth reflects ongoing challenges in the grocery industry, including inflationary pressures and changing consumer behaviors.
Profit and Earnings Performance
The company posted a quarterly profit of $466 million, which was below analysts' expectations of $538.7 million. However, when excluding one-time items, Kroger's adjusted earnings reached 93 cents per share, narrowly beating the consensus estimate. The adjusted earnings surprise helped to boost investor confidence, driving the stock higher.
Merger with Albertsons Looms Large
The biggest question hanging over Kroger’s future is its proposed $20 billion acquisition of rival Albertsons. In February, the Federal Trade Commission (FTC) filed a lawsuit to block the merger, arguing that the deal would reduce competition, lead to higher food prices, and weaken union workers’ bargaining power. The FTC is seeking an injunction to halt the merger.
Kroger CEO Rodney McMullen expressed confidence in the company’s position as the FTC's preliminary injunction hearing nears its conclusion. “The food industry has always been competitive and will continue to be after this merger,” McMullen said during the company’s earnings call on Thursday.
