Kroger Co. (NYSE:KR) delivered second-quarter earnings that outpaced Wall Street expectations, supported by stronger identical sales growth and higher margins, prompting the grocer to raise its full-year guidance.
Adjusted earnings per share came in at $1.04, ahead of the consensus estimate of $0.99. Revenue reached $33.9 billion, just shy of analyst projections of $34.05 billion. Comparable sales excluding fuel rose 3.4% year-on-year, a sharp improvement from the 1.2% growth reported in the same period a year ago.
Shares climbed 1.5% after the update, as investors welcomed the earnings beat and more optimistic outlook.
“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.
Gross margin expanded to 22.5% from 22.1% a year earlier, aided by the divestiture of Kroger Specialty Pharmacy, lower logistics costs, and a reduction in shrink. E-commerce sales advanced 16% in the quarter, underscoring momentum in the company’s digital strategy.
CFO David Kennerley added, “Sales growth has been strong, led by pharmacy, eCommerce and Fresh, and we are encouraged by the improvement in grocery volumes.”
Looking ahead, Kroger raised its full-year guidance for identical sales growth to a range of 2.7% to 3.4%, up from its prior outlook of 2.25% to 3.25%. Management also nudged the lower end of its adjusted operating profit target to $4.8 billion, compared with the previous $4.7 billion, and maintained the upper end at $4.9 billion. Adjusted EPS is now expected to land between $4.70 and $4.80, compared with an earlier range of $4.60 to $4.80. The midpoint of $4.75 sits just below the Street’s $4.78 forecast.
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