The Kroger Co. (KR) reported better-than-expected results for the second quarter. The supermarket operator reported adjusted earnings of $0.93 per share in Q2, down from $0.96 per share in the same period last year. This was better than analysts’ estimates of $0.91 per share.
However, the retailer’s Q2 sales of $33.9 billion fell short of Street expectations of $34.1 billion. Notably, excluding fuel, the company’s sales increased by 1.3% year-over-year, while comparable sales (excluding fuel) went up by 1.2%.
Management Remains Confident About the Legal Battle with the FTC
Kroger’s Chairman and CEO, Rodney McMullen, commented that the retailer was confident “in the facts and the strength of our position.” This statement comes as the company is deeply involved in a legal battle with the Federal Trade Commission (FTC) over its $24.6 billion acquisition of Albertsons.
To provide some context, the FTC filed a lawsuit last year against Kroger to block the merger. The regulator argued that such a deal would significantly reduce competition in the grocery industry and could lead to higher prices for consumers. Moreover, the FTC claimed that the merger would make it more difficult for unions to negotiate better labor contracts.
Despite these concerns, McMullen countered the FTC’s position by emphasizing that closing this merger would “provide meaningful and measurable benefits – lower prices, secure jobs, and expanded access to fresh, affordable food – for customers, associates, and communities across the country.”
Kroger Raises Comparable Sales Forecast
Looking ahead, the company increased the lower end of its forecast for comparable sales (excluding fuel) to be between 0.75% and 1.75% in FY24, compared to the prior estimate in the range of 0.25% to 1.75%. Furthermore, Kroger reiterated its forecast for FY24 with adjusted earnings likely to be between $4.30 and $4.50 per share. Analysts are expecting FY24 earnings of $4.44 per share.
Is Kroger a Good Stock to Buy?
Analysts remain cautiously optimistic about KR stock, with a Moderate Buy consensus rating based on seven Buys and five Holds. Over the past year, KR has increased by more than 10%, and the average KR price target of $58.80 implies an upside potential of 14.2% from current levels. These analyst ratings are likely to change following KR’s results today.
