On September 12, 2024, The Kroger Co (KR, Financial) released its 8-K filing for the second quarter of 2024, providing a detailed overview of its financial performance and reaffirming its full-year guidance.
Kroger is one of the largest grocery retailers in the United States with more than 2,700 stores across a portfolio of over 20 supermarket banners. The company touts its ingrained presence in US communities, citing that it is a top-two grocer in most of its major market areas. Over one fourth of Kroger's roughly $110 billion in nonperishable and fresh food sales (about 75% of revenue) stems from its private-label portfolio, of which the company manufactures about 30% of units via its 33 food production plants. The firm also operates fuel stations and pharmacies at 60% and 80% of its locations, respectively.
Performance Overview
The Kroger Co (KR, Financial) reported total sales of $33.9 billion for Q2 2024, slightly up from $33.85 billion in Q2 2023. Excluding fuel, sales increased by 1.3% year-over-year. The company reported earnings per share (EPS) of $0.64, missing the analyst estimate of $0.72. Adjusted EPS came in at $0.93, down from $0.96 in the same period last year.
Key Financial Metrics
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Total Sales | $33.9 billion | $33.85 billion |
| EPS | $0.64 | ($0.25) |
| Adjusted EPS | $0.93 | $0.96 |
| Operating Profit | $815 million | ($479 million) |
Income Statement Highlights
Operating profit for the quarter was $815 million, a significant improvement from a loss of $479 million in Q2 2023. The FIFO gross margin rate, excluding fuel, increased by 42 basis points, reflecting Kroger’s ability to improve margins while maintaining competitive pricing. However, the Operating, General & Administrative (OG&A) rate increased by 65 basis points, driven by investments in associate wages and increased incentive plan costs.
Balance Sheet and Cash Flow
As of August 17, 2024, Kroger reported total assets of $51.44 billion, up from $50.20 billion a year ago. The company’s net total debt to adjusted EBITDA ratio improved to 1.24 from 1.31, indicating a stronger balance sheet. Net cash provided by operating activities was $3.46 billion for the year-to-date period, compared to $4.36 billion in the same period last year.
Capital Allocation and Guidance
Kroger expects to continue generating strong free cash flow and remains committed to investing in the business for long-term sustainable growth. The company has paused its share repurchase program to prioritize de-leveraging following the proposed merger with Albertsons. The net total debt to adjusted EBITDA ratio target range is 2.30 to 2.50.
"Our solid sales results through the first two quarters of the year give us the confidence to raise the low end of our full-year identical sales without fuel guidance by 50 basis points. We now expect identical sales without fuel to be in the range of 0.75% to 1.75%," said Interim CFO Todd Foley.
Conclusion
The Kroger Co (KR, Financial) demonstrated resilience in Q2 2024, with steady sales growth and improved operating profit. However, the company faces challenges such as increased OG&A costs and a pending merger with Albertsons. Despite these hurdles, Kroger's strong balance sheet and strategic investments position it well for long-term growth.
For more detailed insights, visit the full 8-K filing.
Explore the complete 8-K earnings release (here) from The Kroger Co for further details.
