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Category: Stock Market and Kroger Company
Date: 18 June 2020 Stock Price: $31.64 We take a look at the 1st quarter earnings release of their 2020 fiscal year of Kroger one of the world's largest retail companies with over 2 700 outlets. Kroger (KR) 1st quarter 2020 revenues came in at $41.6 billion
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- The COVID-19 pandemic and the most recent instances of racial injustice have changed our country in unmistakable ways, not the least of which is the devastating loss of life and livelihood that has affected so many Americans. Kroger remains guided by our purpose and our values."
About The Kroger Company
The Kroger Co. was founded in 1883 and incorporated in 1902. As of February 1, 2020, Kroger is one of the world’s largest retailers, as measured by revenue, operating 2,757 supermarkets under a variety of local banner names in 35 states and the District of Columbia. Of these stores, 2,270 have pharmacies and 1,567 have fuel centers. We offer Pickup (also referred to as ClickList®) and Harris Teeter ExpressLane™ — personalized, order online, pick up at the store services — at 1,989 of our supermarkets and provide home delivery service to 97% of Kroger households. We also operate an online retailer. We operate 35 food production plants, primarily bakeries and dairies, which supply approximately 31% of Our Brands units and 42% of the grocery category Our Brands units sold in our supermarkets; the remaining Our Brands items are produced to our strict specifications by outside manufacturers. Our revenues are predominately earned and cash is generated as consumer products are sold to customers in our stores, fuel centers and via our online platforms. We earn income predominately by selling products at price levels that produce revenues in excess of the costs we incur to make these products available to our customers. Such costs include procurement and distribution costs, facility occupancy and operational costs, and overhead expenses. Our retail operations, which represent 97% of our consolidated sales, is our only reportable segment.
Quick facts about Kroger:
Learn more about Kroger Company here
Quick facts about Kroger:
- Kroger Company is listed on the New York Stock Exchange under share code ticker: KR
- Number of employees of Kroger Company: 435 000
- Number of Kroger Company stores: 2 757
- 2270 of the stores had pharmacies
- 1567 had fuel centres
- Revenue of Kroger in 2019: $122.2 billion
- Earnings per Kroger share in 2019: $2.04
- Shares in issue: 788 million
- Cash on balance sheet Q1 2020: $425 million
- Stockholders equity in Kroger Company: $9.238 billion
- Stockholders equity per share in Kroger: $11.83
Learn more about Kroger Company here
Overview of Kroger's 1st quarter 2020 earnings report
The data below refers to the latest quarter unless specified otherwise:
- Sales: $41.549 billion (up from $37.251 billion from the same quarter of the previous year)
- Sales increased by 11.5% over the last 12 months
- Net income: $1.212 billion (up from $772 million for the same quarter of the previous year)
- Net profit margin for Kroger: 2.9%
- Diluted earnings per share: $1.53 (up from $0.96 for the same quarter of the previous year)
- PE ratio of Kroger: 19.3
- Dividend declared for the quarter: $0.16 (up from $0.14 for the same quarter of the previous year)
- Dividend yield: 2%
- Diluted weighted-average shares outstanding: 788 million (down from 805 million for the same quarter of the previous year)
- Cash and cash equivalents: $425 million
- Cash and cash equivalents per share: $0.54
- Cash and cash equivalents makes up 1.7% of Kroger's market capital
- Cash and cash equivalents makes up 0.91 % of Kroger's total assets
- Accounts receivable: $1.552 billion
- Accounts receivable makes up 3.3% of the Kroger's total assets.
- Inventories: $6.297 billion (up from $6.707 billion for the same quarter of the previous year)
- Inventories makes up 13.4% of Kroger's total assets
- Inventories declined by -6.1% over the last 12 months
- Stockholders equity in Kroger: $9.328 billion
- Stockholders equity per share: $11.83
- The Kroger Company is trading at 2.67 times its stockholders equity per share which is within the expected range of between 2 and 4 times that most firms tend to trade at
- The average price to book value of firms in the S&P500 is 3.7
Kroger's management commentary on the results and earnings guidance
CINCINNATI, June 18, 2020 /PRNewswire/ -- The Kroger Co. (NYSE: KR) today reported its first quarter 2020 results, provided a Restock Kroger progress update on the three-year transformation plan and an update to the COVID-19 response.
Comments from Chairman and CEO Rodney McMullen
"The COVID-19 pandemic and the most recent instances of racial injustice have changed our country in unmistakable ways, not the least of which is the devastating loss of life and livelihood that has affected so many Americans. Kroger remains guided by our purpose and our values. I am proud of our associates who stepped up when we were called to be there for our customers, communities and each other. Our company is proud to stand with our Black associates, customers and communities against racism and for a more just and equitable society.
Under Restock Kroger, we have made significant investments over the last several years to establish a seamless digital ecosystem, strengthen Our Brands and our personalization capabilities, and to enhance product freshness and quality. These investments helped Kroger deliver improved results in 2019, a strong start to the quarter, and very much came to the forefront as we provided our customers with the fresh food and essentials they have needed during the pandemic.
We are proud of our heroic and dedicated associates who are serving our customers when they need us most. As America enters the next phase of the pandemic, we know that our associates will continue to rise to meet the challenge, delivering Fresh for Everyone and helping our customers, communities and America emerge even stronger."
Comments from Chairman and CEO Rodney McMullen
"The COVID-19 pandemic and the most recent instances of racial injustice have changed our country in unmistakable ways, not the least of which is the devastating loss of life and livelihood that has affected so many Americans. Kroger remains guided by our purpose and our values. I am proud of our associates who stepped up when we were called to be there for our customers, communities and each other. Our company is proud to stand with our Black associates, customers and communities against racism and for a more just and equitable society.
Under Restock Kroger, we have made significant investments over the last several years to establish a seamless digital ecosystem, strengthen Our Brands and our personalization capabilities, and to enhance product freshness and quality. These investments helped Kroger deliver improved results in 2019, a strong start to the quarter, and very much came to the forefront as we provided our customers with the fresh food and essentials they have needed during the pandemic.
We are proud of our heroic and dedicated associates who are serving our customers when they need us most. As America enters the next phase of the pandemic, we know that our associates will continue to rise to meet the challenge, delivering Fresh for Everyone and helping our customers, communities and America emerge even stronger."
2020 Guidance
Comments from CFO Gary Millerchip
"The COVID-19 pandemic has dramatically changed the outlook for food retail in 2020 and we continue to monitor, evaluate and adjust our plans to address the impact to our business. There are still many unknown factors related to the long-term impact of COVID-19 that could influence our financial results for the remainder of 2020, such as:
In recognition of these factors, it is difficult to predict specific outcomes and as such Kroger is not reaffirming or providing new 2020 guidance. While we expect to exceed the outlook shared in our April 1 business update for identical sales without fuel, adjusted FIFO operating profit, adjusted EPS and adjusted free cash flow, the Company is not able to forecast the extent of such upside for the reasons mentioned above. Kroger's financial model has proven to be resilient throughout the economic cycle. We remain confident in our business model as well as our ability to generate strong free cash flow and achieve sustainable and attractive total shareholder returns."
Kroger's COVID-19 Response
Kroger's most urgent priority during the COVID-19 pandemic has been to provide a safe environment for associates and customers with open stores, ecommerce solutions and an efficiently operating supply chain so that its communities have access to fresh, affordable food and essentials. The Kroger Family of Companies announced investments of more than $830 million to reward associates and safeguard associates, customers and communities. The Company's response to the COVID-19 pandemic demonstrates that when a company is clear on its purpose, values, and vision, we can navigate through any challenge together.
Comments from CFO Gary Millerchip
"The COVID-19 pandemic has dramatically changed the outlook for food retail in 2020 and we continue to monitor, evaluate and adjust our plans to address the impact to our business. There are still many unknown factors related to the long-term impact of COVID-19 that could influence our financial results for the remainder of 2020, such as:
- continued investments to help our customers and associates,
- uncertainty surrounding consumer behavior, restrictions and what will be the new normal, and
- potential long-term shift in customers eating more food at home.
In recognition of these factors, it is difficult to predict specific outcomes and as such Kroger is not reaffirming or providing new 2020 guidance. While we expect to exceed the outlook shared in our April 1 business update for identical sales without fuel, adjusted FIFO operating profit, adjusted EPS and adjusted free cash flow, the Company is not able to forecast the extent of such upside for the reasons mentioned above. Kroger's financial model has proven to be resilient throughout the economic cycle. We remain confident in our business model as well as our ability to generate strong free cash flow and achieve sustainable and attractive total shareholder returns."
Kroger's COVID-19 Response
Kroger's most urgent priority during the COVID-19 pandemic has been to provide a safe environment for associates and customers with open stores, ecommerce solutions and an efficiently operating supply chain so that its communities have access to fresh, affordable food and essentials. The Kroger Family of Companies announced investments of more than $830 million to reward associates and safeguard associates, customers and communities. The Company's response to the COVID-19 pandemic demonstrates that when a company is clear on its purpose, values, and vision, we can navigate through any challenge together.
The Kroger Company (NYSE: KR) stock price history
The image below shows the stock price history of The Kroger Company over the last 5 years. And to be honest its not been a good time for The Kroger Company over the last 5 years. 5 years ago the stock of Kroger was trading at $37 and its currently trading at $31.80 That's a loss of -14.1% suffered by Kroger stockholders over the last 5 years.
The stock of Kroger Company is trading at closer to its 52 week high of $36.84 than it is to its 52 week low of $20.70 which to us is an indication that the short term sentiment and momentum of Kroger Company stock is positive at this point in time.
The stock of Kroger Company is trading at closer to its 52 week high of $36.84 than it is to its 52 week low of $20.70 which to us is an indication that the short term sentiment and momentum of Kroger Company stock is positive at this point in time.
Kroger (KR) vs Target (TGT) vs Walmart (WMT)
The image below shows the stock price of Kroger (KR), Target (TGT) and Walmart (WMT) over the last three years. Of the three retail related stocks we are looking at, Kroger (KR) was the worst performing of the three, and Target (TGT) the best performer. Over the three year period Kroger (KR) provided a return of -36.72%, Walmart (WMT) increased by 57.05% and Target (TGT) increased by 126.11% over the same time period.
Recent coverage of The Kroger Company
The extract below touches on the latest news regarding Kroger Company as obtained from MarketWatch
Kroger Co. KR, -2.50% reported first-quarter net income of $1.21 billion, or $1.52 per share, up from $772 million, or 95 cents per share, last year. Adjusted EPS of $1.22 was well ahead of the FactSet consensus for $1.12. Sales of $41.55 billion were up from $37.25 billion last year and beat the FactSet consensus for $40.71 billion. Identical sales excluding fuel soared 19%. The FactSet same-store sales consensus was for 13.8% growth. Kroger did not provide guidance due to coronavirus-related uncertainty. Among the measures Kroger has taken amid the COVID-19 pandemic are acceptance of Supplemental Nutrition Assistance Program (SNAP) for low-contact pickup service, expansion of contactless Kroger Pay and introduction of one-way aisles in some markets. Kroger stock slipped about 1% in Thursday premarket trading, but has gained 13.2% for the year to date while the S&P 500 index SPX, -0.25% is down 3.6% for the period.
Read the full article here.
Kroger Co. KR, -2.50% reported first-quarter net income of $1.21 billion, or $1.52 per share, up from $772 million, or 95 cents per share, last year. Adjusted EPS of $1.22 was well ahead of the FactSet consensus for $1.12. Sales of $41.55 billion were up from $37.25 billion last year and beat the FactSet consensus for $40.71 billion. Identical sales excluding fuel soared 19%. The FactSet same-store sales consensus was for 13.8% growth. Kroger did not provide guidance due to coronavirus-related uncertainty. Among the measures Kroger has taken amid the COVID-19 pandemic are acceptance of Supplemental Nutrition Assistance Program (SNAP) for low-contact pickup service, expansion of contactless Kroger Pay and introduction of one-way aisles in some markets. Kroger stock slipped about 1% in Thursday premarket trading, but has gained 13.2% for the year to date while the S&P 500 index SPX, -0.25% is down 3.6% for the period.
Read the full article here.
The Kroger Company (NYSE: KR) latest stock valuation
So what are The Kroger Company stock worth considering their latest earnings release? Based on the earnings released and the outlook provided our valuation models set a target (full value) price for The Kroger Company of $38.70 a stock (up slightly from our 4th quarter 2019 earnings report valuation of Kroger) . We therefore believe Kroger Company stock is undervalued.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price which in this case is $38.70,a good entry point into the stock of Kroger Company would therefore be at $34.80 or below.
We expect that the stock of Kroger Company will kick upwards from its current price to levels closer to our target price/ full value price in coming weeks and months. Since the stock of Kroger is trading at well below our suggested entry point we rate the stock of Kroger (KR) as a buy.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price which in this case is $38.70,a good entry point into the stock of Kroger Company would therefore be at $34.80 or below.
We expect that the stock of Kroger Company will kick upwards from its current price to levels closer to our target price/ full value price in coming weeks and months. Since the stock of Kroger is trading at well below our suggested entry point we rate the stock of Kroger (KR) as a buy.
Next earnings release of Kroger Company
It is expected that Kroger Company will release their 2nd quarter 2020 earnings report towards in early September 2020