Kroger's fiscal fourth-quarter earnings surpassed market expectations despite a revenue miss, signaling a strategic adaptability in a competitive retail landscape. The supermarket chain has provided a conservative full-year earnings outlook, suggesting a shift in focus towards sustainable growth strategies. The company's forecast for adjusted earnings is set between $4.60 and $4.80 per share for fiscal 2025, slightly below the consensus estimate of $4.82 from FactSet.
Reflecting on fiscal 2024, adjusted EPS experienced a decline to $4.47 from $4.76 annually, illustrating challenges in maintaining profitability amid rising operational costs. When excluding fuel, the anticipated identical sales growth is projected at 2% to 3%, a variance from the 2.1% growth expected by analysts.
The previous year reported a modest increase in same-store sales, which saw a rise of 1.5%. "Investments made to diversify our business have added more ways for Kroger to drive sustainable future growth," stated interim Chief Financial Officer Todd Foley. "The strength of our model and the momentum in our business give us confidence in our 2025 growth plans." The market reacted positively to Kroger’s fourth-quarter results, with shares climbing 2.8% during Thursday trading.
For the quarter ending February 1, the company's adjusted EPS noted a decline to $1.14 per share from $1.34 the year prior, although it still surpassed the average analyst estimate of $1.11. Additionally, sales decreased to $34.31 billion from $37.06 billion, narrowly falling short of the market's prediction of $34.57 billion. Excluding fuel, identical sales saw a commendable increase of 2.4%, rebounding from a previous decline of 0.8% experienced a year earlier.
This figure outstripped the market’s growth forecast of 2%, illustrating Kroger’s effective strategies to enhance customer engagement and sales performance. The first-in, first-out gross margin rate, excluding fuel, rose by 54 basis points year-over-year, primarily attributed to the sale of the company's specialty pharmacy business concluded in October, alongside reduced shrinkage, which refers to inventory loss from theft or internal processes. Interim Chief Executive Ron Sargent commented on Kroger's resilient performance, stating, "Kroger is operating from a position of strength, delivering fourth-quarter results that came in ahead of expectations due to the strength of our model and the disciplined execution of our teams." Earlier this week, Sargent stepped into the role of CEO on an interim basis following the departure of longtime leader Rodney McMullen amidst an investigation regarding personal conduct issues.
With these insights, stakeholders remain watchful of Kroger's strategies and performance trajectory as it navigates through a complex economic environment..