The Kroger Co. (NYSE:KR) has released its fourth-quarter fiscal 2023 results, surpassing expectations on the bottom line while missing the Zacks Consensus Estimate on the top line. Despite an improvement from the previous year’s performance, the company witnessed a decline in identical sales excluding fuel.
Kroger is operating in a challenging environment characterized by restrained consumer spending. Moreover, the grocery industry is experiencing heightened competition, with retailers actively slashing prices and expanding their selection of budget-friendly food items.
However, Kroger’s customer segmentation strategy, emphasis on value, and focus on its ‘Our Brands’ portfolio has provided some resilience against these challenges. The company remains committed to its core strengths, including offering a variety of fresh products, personalized shopping experiences, and a seamless digital platform, all aimed at sustaining its growth trajectory.
Analyzing Q4 Performance
Kroger reported adjusted earnings of $1.34 per share, surpassing the Zacks Consensus Estimate of $1.13 and marking an improvement from 99 cents reported in the same quarter last year.
Total sales of $37,064 million fell short of the Zacks Consensus Estimate of $37,248 million. Nonetheless, sales showed improvement from $34,823 million reported in the year-ago period. Excluding fuel and the 53rd week, sales declined by 0.5% year over year. Identical sales without fuel dropped by 0.8%, while digital sales grew by more than 10% during the quarter.
The gross margin stood at 22.7% of sales, while the FIFO gross margin rate, excluding fuel and the 53rd week, expanded by 13 basis points compared to the same period last year. The adjusted FIFO operating profit totaled $1,307 million, up from $1,274 million reported in the year-ago period.
Other Financial Highlights
Kroger ended the quarter with $235 million in cash, a total debt of $12,226 million, and shareowners’ equity of $11,601 million. Net total debt decreased by $1,996 million over the last four quarters.
For fiscal 2024, the company estimates capital expenditures in the range of $3.4-$3.6 billion and expects to generate adjusted free cash flow between $2.5 billion and $2.7 billion.
Outlook
Kroger anticipates identical sales without fuel to increase between 0.25% and 1.75% in fiscal 2024. The anticipated adjusted FIFO operating profit is projected to fall within the range of $4.6 billion to $4.8 billion, as opposed to the $5 billion reported in fiscal 2023. Adjusted earnings for fiscal 2024 are projected to be between $4.30 and $4.50 per share compared to $4.76 reported in fiscal 2023.
Shares of Kroger have increased by 13.3% in the past three months, slightly lagging behind the industry’s rise of 19.8%.
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