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Kroger publishes Q2 identical sales profit, tweaks prospect of recovery



Kroger Co. reported virtually equal sales for its fiscal second quarter, but saw improved same-store results and adjusted earnings per share that exceeded Wall Street's forecast.

And in a conference call with analysts Thursday, Chairman and CEO Rodney McMullan said that Kroger does not expect to reach its three-year $ 400 million goal of operating profit by 2020, part of Restock Kroger's strategic plan . The news sent the shares in the morning before recovering in the afternoon trading.

For the quarter ended August 17, Kroger's sales were $ 28.17 billion, up 0.5% from $ 28.01

billion a year ago early. Excluding fuels, orders and merger transactions, sales grew 2.5%, Kroger said. Sales of identical stores grew 2.2% without fuel, compared to 1.6% profit in the quarter of 2018.

Operating profit increased 1.8% to $ 559 million. Kroger reported a $ 30 million LIFO fee in the quarter versus $ 12 million for the same period last year, driven by higher than expected inflation in the dry food, pharmaceuticals and dairy industries

 Rodney_McMullen_Kroger_headshot [1] .png "Guided by our clients' craze, Kroger delivered its best results with identical sales after launching our transformation plan. Our in-house measures are improving even faster than our identical sales growth, "McMulen (left) told analysts."

"We continue to make significant investments to redefine our customers' experience with groceries. We build a platform of hassle-free experiences to serve customers whatever they want, anytime they want. We know that hassle-free experience is essential to the customer experience today and tomorrow, so we continue to invest heavily in our capabilities in this area, "he explained. "Kroger's digital sales grew a solid 31% in the second quarter. The growth of pickup and delivery sales continued to develop at the midpoint of 30% in the quarter. In the future, we expect the growth rate of our digital sales to moderate over the year, primarily due to the cycling of the home cook and as a result of our disciplined focus on increasing [Kroger] customer ship over other digital offerings such as Vitacost. "[19659002] In the second quarter, Kroger expanded to 1,780 online grocery stores and 2,225 delivery locations, covering more than 95% of households in the company's market areas.

"The important thing is that we are beginning to see improvement in operating profit trends in our digital business," McMullan said in a call. "Our digital business is becoming smaller than the headwind, which is an important milestone as we continue to invest in new opportunities to support the transition to hassle. But I would like to point out that this is still a significant investment for the company. "

Sales in the Kroger private label portfolio or Our Brands increased by 3.1% year over year. The retailer said it was launching 203 new items of our brands in the quarter.

"Retail and stake growth has led to the highest second-quarter share in our brand history," said McMulen. "And these new items delivered more than $ 137 million in second-quarter sales, further boosting our supermarket business," he added.

 Gary_Millerchip_Kroger_0 [1]. ) said in a call that key categories of beverages, manufactured and natural foods "surpassed the company" in the second quarter, which also noted momentum in the drugstore business's top lines and an average single-digit increase in prescriptions. </p>
<p>  "Overall, we are pleased with the sales progress during the quarter and will continue to work to build on this momentum in the second half of the year," Millerchip said. </p>
<p>  After all, Kroger reported net income for the second quarter from $ 297 million, or 37 cents per diluted share, compared to $ 508 million, or 62 cents per diluted share during the prior year period, except for the impact of retirement benefit adjustments, changes in the market value of securities of Ocado and the sale of its convenience store business, adjusted profit reached $ 357 million, or 44 cents per diluted share, for the quarter in 2019 against $ 336 million, or 41 cents per diluted share in the 2018 quarter. </p>
<p>  Analysts forecast , adjusting EPS by 41 cents, with estimates ranging from 31 cents to 46 cents, according to Refinitiv / Thomson Reuters. </p>
<p>  For the first half of 2019, sales fell 0.5% year over year to $ 65.42 billion. Same-store sales rose 1.8%, the same growth as in the first half of 2018. Net income was $ 1.07 billion, or $ 1.31 per diluted share, compared to $ 2.53 billion, or $ 3.03 a diluted share, a year earlier. Adjusted earnings were $ 943 million, or $ 1.16 per diluted share, against $ 962 million, or $ 1.15 per diluted share, in the prior year period. </p>
<p>  McMullan and Millerchip stated that Kroger is on track to secure fiscal 2019 additional $ 100 million in operating profit driven by alternative revenue streams, namely media and personal finance. </p>
<p>  "We want to be clear on today's call that we do not confirm the three-year, $ 400 million incremental operating profit expectation," McMullan tells analysts. [19659002] Looking ahead, Kroger now forecasts fiscal 2019 GAAP EPS from $ 2.30 to $ 2.40, compared to previous guidance of $ 2.38 to $ 2.48. The company confirmed its adjusted EPS estimate of $ 2.15 to $ 2.25. </p>
<p>  The Wall Street consensus estimate is for $ 2.17 year-round EPS, with estimates ranging from $ 2.00 to $ 2.25, according to Refinitiv / Thomson Reuters. </p><div><script async src=

McMullen said in the analyst's call that more details behind Kroger's guidance would be shared on the annual Cincinnati-based investor day in November.

"Transformation is incredibly difficult and this is the journey we are taking with Restock Kroger. As we reflect on this journey, we want to be transparent about what went according to plan and what was not expected, "he said.

" For a three-year plan in today's retail environment, there are many participations and claims. That said, I want to reiterate that Kroger is committed to growing FIFO's operating profit in 2020 in 2019, confirmed the guidelines, "added McMullan. "The Restock Kroger Transformation Road is a long-term growth company looking forward to, and the benefits we have seen so far have helped Kroger in our transformation from a grocery to a growth company. We have the right overall strategy and framework for this business and look forward to telling you more about it in November. "

Kroger closed its second quarter in 2019 with a total of 2 599 grocery stores compared to 2,769 a year ago. Her store banners include Kroger, Ralphs, Dillons, Smith & # 39; s, King Soopers, Fry & # 39; s, QFC, City Market, Owen & # 39; s, Jay C, Pay Less, Baker & # 39; s, Gerbes , Harris Teeter, Pick's Save, Copps, Metro Market, Mariano's, Fred Meyer, Food 4 Less and Foods Co, among others.


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