The Kroger Co. KR reported fourth-quarter fiscal 2024 results, with the top line missing the Zacks Consensus Estimate but the bottom line exceeding the same. However, both metrics declined year over year. Management announces guidance for fiscal 2025.

Kroger’s fiscal 2024 results highlight the resilience of its value creation model, driving solid performance and strong free cash flow. Strategic investments have diversified the business, supporting sustainable growth. With a strengthened balance sheet, Kroger plans to invest in new store growth, increase its dividend (subject to board approval) and return excess cash to shareholders through share repurchases. Management remains confident in its 2025 growth plans, backed by the company’s strong business model and momentum.

Kroger’s Quarterly Performance: Key Insights

Kroger delivered adjusted earnings of $1.14 per share, which beat the Zacks Consensus Estimate of $1.12. However, the bottom line declined from the year-ago period’s $1.34.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

The Kroger Co. Price, Consensus and EPS Surprise

The Kroger Co. price-consensus-eps-surprise-chart | The Kroger Co. Quote

Total sales were $34,308 million, down from $37,064 million in the year-ago period, indicating a $2.7 billion impact from the 53rd week in 2023 and $737 million from Kroger Specialty Pharmacy sales. The metrics came below the Zacks Consensus Estimate of $34,560 million.

Excluding fuel, Kroger Specialty Pharmacy and the extra week in 2023, sales grew 2.6% year over year. We note that identical sales without fuel rose 2.4%. Digital sales grew 11% during the quarter under discussion.

The gross margin was 22.7% of sales, driven by the sale of Kroger Specialty Pharmacy and lower shrink, partially offset by lower pharmacy margins and the LIFO charge. The FIFO gross margin rate, excluding rent, depreciation and amortization, fuel and the 53rd week in 2023, increased 54 basis points year over year. This expansion was primarily due to the sale of Kroger Specialty Pharmacy and reduced shrink, partially offset by softer pharmacy margins.

The operating, general & administrative rate rose 16 basis points, excluding fuel, adjustment items and the 53rd week in 2023. The rise was primarily driven by the divestiture of Kroger Specialty Pharmacy, higher incentive plan expenses and investments in associate wages, partially offset by ongoing cost-saving initiatives.

The adjusted FIFO operating profit was $1,174 million, down from $1,307 million reported in the year-ago period.

KR’s Financial Snapshot

Kroger ended the quarter with cash of $216 million, total debt of $17,905 million and shareowners’ equity of $8,281 million. Net total debt increased $3,584 million over the last four quarters. 

The company guided capital expenditures in the band of $3.6-$3.8 billion and expects to generate adjusted free cash flow between $2.8 billion and $3 billion in fiscal 2025.

Sneak Peek Into Kroger’s Outlook

For fiscal 2025, the company foresees identical sales without fuel to increase between 2% and 3%. Adjusted earnings are envisioned to be $4.60-$4.80 per share compared with the $4.47 reported in fiscal 2024. 

Management anticipates an adjusted FIFO operating profit of $4.7-$4.9 billion for fiscal 2025, whereas it reported $4.7 billion in fiscal 2024. 

Shares of this Zacks Rank #3 (Hold) company have risen 12.5% in the past three months compared with the industry’s growth of 2.6%.

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Stocks to Consider

Sprouts Farmers SFM, which is engaged in the retailing of fresh, natural and organic food products, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of 12.1% and 22.4%, respectively, from the year-ago reported numbers. SFM delivered a trailing four-quarter earnings surprise of 15.1%, on average.

Farmer Bros. Co. FARM engages in the roasting, wholesale, equipment servicing and distribution of coffee, tea, and other allied products in the United States. It presently has a Zacks Rank #2 (Buy). FARM delivered a trailing four-quarter earnings surprise of 35%, on average.

The Zacks Consensus Estimate for Farmer Bros.’ current financial-year sales and earnings implies growth of 3.3% and 25%, respectively, from the year-ago period’s reported figure.

Post Holdings, Inc. POST operates as a consumer-packaged goods holding company in the United States and internationally. It currently carries a Zacks Rank #2. POST delivered a trailing four-quarter earnings surprise of 22.3%, on average.

The Zacks Consensus Estimate for Post Holdings’ current fiscal-year sales and earnings indicates growth of 0.3% and 2.2%, respectively, from the prior-year reported levels.

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