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Category: Stock Market and Kroger Company (KR)
Date: 4 December 2020 Stock Price of Kroger: $30.88 We take a look at the 3rd quarter earnings release of their 2020 fiscal year of Kroger one of the world's largest retail companies with over 2 700 outlets. Kroger's 3rd quarter 2020 sales came in at $29.7 billion and they reported net income of $631 million.
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- Each day I'm inspired by the work our incredible associates do to bring to life our purpose, to Feed the Human Spirit. I am proud of our dedicated associates who are serving our customers when they need us most. Our top priority is to provide a safe environment for associates and customers and as the pandemic continues, we will continue to rise to meet the challenge- Chairman and CEO Rodney McMullen"
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 3rd quarter 2020 earnings report
The data below refers to the latest quarter unless specified otherwise:
- Sales: $29.7 billion (up from $27.9 billion from the same quarter of the previous year)
- Sales increased by 6.5% over the last 12 months
- Net income: $631 million (up from $263 million for the same quarter of the previous year)
- Net profit margin for Kroger: 2.12%
- Diluted earnings per share: $0.81 (up from $0.32 for the same quarter of the previous year)
- PE ratio of Kroger: 6.8
- Dividend declared for the quarter: $0.18 (up from $0.16 for the same quarter of the previous year)
- Dividend yield: 2.3%
- Diluted weighted-average shares outstanding: 780 million (down from 807 million for the same quarter of the previous year)
- Cash and cash equivalents: $367 million
- Cash and cash equivalents per share: $0.47
- Cash and cash equivalents makes up 1.5% of Kroger's market capital
- Cash and cash equivalents makes up 0.75 % of Kroger's total assets
- Accounts receivable: $1.61 billion
- Accounts receivable makes up 3.4% of the Kroger's total assets.
- Inventories: $7.47 billion (up from $7.41 billion for the same quarter of the previous year)
- Inventories makes up 15.4% of Kroger's total assets
- Inventories increased slightly by 0.8% over the last 12 months
- Stockholders equity in Kroger: $10.04 billion
- Stockholders equity per share: $12.87
- The Kroger Company is trading at 2.39 times its stockholders equity per share which is within the expected range of between 2 and 5 times that most firms tend to trade at
- The average price to book value of firms in the S&P500 is 3.9
Kroger's management commentary on their 3rd quarter 2020 earnings
CINCINNATI, Dec. 3, 2020 /PRNewswire/ -- The Kroger Co. (NYSE: KR) today reported its third quarter 2020 results, provided a Restock Kroger progress update on the three-year transformation plan, and an update to its COVID-19 response.
Comments from Chairman and CEO Rodney McMullen
"Our Kroger family of associates have been nothing short of incredible during the pandemic and they continue to inspire me every day. I am proud of our dedicated associates who continued to diligently execute our Restock Kroger transformation while serving our customers when they need us most.
We delivered strong results in the third quarter. Customers are at the center of everything we do and sales remain elevated as we continue to enhance our competitive moats – Fresh, Our Brands, Data & Personalization and Seamless. We are executing against our strategy even during the pandemic and continue to grow market share.
The strong underlying momentum in our core supermarket business and acceleration in the growth of our alternative profit business demonstrates we are successfully transforming our business model to deliver consistently strong and attractive total shareholder return in 2020 and beyond."
Comments from Chairman and CEO Rodney McMullen
"Our Kroger family of associates have been nothing short of incredible during the pandemic and they continue to inspire me every day. I am proud of our dedicated associates who continued to diligently execute our Restock Kroger transformation while serving our customers when they need us most.
We delivered strong results in the third quarter. Customers are at the center of everything we do and sales remain elevated as we continue to enhance our competitive moats – Fresh, Our Brands, Data & Personalization and Seamless. We are executing against our strategy even during the pandemic and continue to grow market share.
The strong underlying momentum in our core supermarket business and acceleration in the growth of our alternative profit business demonstrates we are successfully transforming our business model to deliver consistently strong and attractive total shareholder return in 2020 and beyond."
Capital Allocation Strategy
Kroger's capital allocation strategy is to use its adjusted free cash flow to invest in the business and drive profitable growth while also maintaining its current investment grade debt rating and returning capital to shareholders. The company actively balances the use of its adjusted free cash flow to achieve these goals.
Kroger's net total debt to adjusted EBITDA ratio is 1.74, compared to 2.50 a year ago. The company's net total debt to adjusted EBITDA ratio target range is 2.30 to 2.50. Kroger held temporary cash investments of approximately $1.8 billion as of the end of the quarter, reflecting improved operating performance and significant improvement in working capital.
During the quarter, Kroger repurchased $304 million of shares under its $1 billion board authorization announced on September 11, 2020. Year-to-date, Kroger has repurchased $989 million of shares. Earlier this year, Kroger increased the dividend by 13 percent, marking the 14th consecutive year of dividend increases.
Guidance Update
Comments from CFO Gary Millerchip
"As a result of our continued strong performance, market share growth and the expectation of sustained trends in food at home consumption for the remainder of our fiscal year, we are raising our full year 2020 guidance. For the full year 2020, we expect total identical sales without fuel to be around 14% and adjusted EPS growth of 50% to 53%.
Our guidance contemplates continued investments in associates and customers plus ongoing COVID-19 related costs, balanced with continued execution of cost savings initiatives and growth in alternative profit businesses.
Looking toward 2021, we believe that our performance will be stronger than we would have expected prior to the pandemic when viewed as a two-year stacked result for identical sales without fuel growth and as a compounded growth rate over 2020 and 2021 for adjusted earnings per share growth."
Kroger's capital allocation strategy is to use its adjusted free cash flow to invest in the business and drive profitable growth while also maintaining its current investment grade debt rating and returning capital to shareholders. The company actively balances the use of its adjusted free cash flow to achieve these goals.
Kroger's net total debt to adjusted EBITDA ratio is 1.74, compared to 2.50 a year ago. The company's net total debt to adjusted EBITDA ratio target range is 2.30 to 2.50. Kroger held temporary cash investments of approximately $1.8 billion as of the end of the quarter, reflecting improved operating performance and significant improvement in working capital.
During the quarter, Kroger repurchased $304 million of shares under its $1 billion board authorization announced on September 11, 2020. Year-to-date, Kroger has repurchased $989 million of shares. Earlier this year, Kroger increased the dividend by 13 percent, marking the 14th consecutive year of dividend increases.
Guidance Update
Comments from CFO Gary Millerchip
"As a result of our continued strong performance, market share growth and the expectation of sustained trends in food at home consumption for the remainder of our fiscal year, we are raising our full year 2020 guidance. For the full year 2020, we expect total identical sales without fuel to be around 14% and adjusted EPS growth of 50% to 53%.
Our guidance contemplates continued investments in associates and customers plus ongoing COVID-19 related costs, balanced with continued execution of cost savings initiatives and growth in alternative profit businesses.
Looking toward 2021, we believe that our performance will be stronger than we would have expected prior to the pandemic when viewed as a two-year stacked result for identical sales without fuel growth and as a compounded growth rate over 2020 and 2021 for adjusted earnings per share growth."
The Kroger Company (NYSE: KR) stock price history over the last 5 years
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 $41 and its currently trading at $30.88 That's a loss of -24.7% suffered by Kroger stockholders over the last 5 years.
The stock of Kroger Company is trading at closer to its 52 week high than it is to its 52 week low 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 than it is to its 52 week low 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) stock over the last 5 years
The image below shows the stock price of Kroger (KR), Target (TGT) and Walmart (WMT) over the last 5 years. While all three firms are active in the retail sector in the United States and all have revenes topping billions of dollars each year, their stock price trends and performances are very different. The summary below shows the stock price returns of the three firms over the last 5 years
- Walmart (WMT): 142%
- Target (TGT): 137.6%
- Kroger: -24.6%
Recent coverage of The Kroger Company
The extract below touches on the latest news regarding Kroger Company as obtained from seekingAlpha.com
Warren Buffett’s Berkshire Hathaway (BRK.B) (BRK.A) purchased a large stake in Kroger (KR) during the final months of 2019 for two primary reasons. First, the company was (and remains) dirt cheap vs. its trading history. Second, it has become a leader in ecommerce, with customers ordering groceries online, followed by curbside or in-store pickup. Then, the coronavirus pandemic showed up and business for the nation’s biggest grocery chain has boomed. (The company maintains a #1 or #2 food retailing position in about 90% of its markets.)
With the November announcements of successful vaccine therapies coming to rescue the day, the first thought is Kroger’s fortunes will soon flatten or even sour. Investors seem willing to quickly sell shares, as the world hopefully gets back to normal sometime next year. Guess what? Kroger will still be feeding America in 2021, and the stock hasn’t risen much relative to Wall Street’s historic snapback to all-time highs overall.
In the end, I can argue Kroger remains a terrific buy, with an improving balance sheet and a leading, necessary retail position in much of the U.S. If you believe people will continue eating next year, like I do, perhaps you should review the cheap investment proposition the stock offers. Measured against the most overvalued Wall Street situation in history, per the market’s record pricing to trailing sales and GDP output, Kroger may be a worthwhile bargain to hold. Steady sales trends, regular profit margins, a strong balance sheet, and a nice dividend yield story have convinced me to own the name.
Read the full article here.
- Kroger's valuation is hugging a 10-year low, based on a number of basic fundamental ratios.
- Against the most overvalued U.S. stock market condition in history, cheap defensive gems are getting hard to find.
- Kroger's balance sheet, profit margin, and cash generation are in their strongest shape in years, thanks to the COVID-19 pandemic and related stay-at-home consumer demand.
- A well-covered dividend payout and better than S&P 500 normal, upfront yield are worth consideration. Dividend growth potential is also uniquely positive.
Warren Buffett’s Berkshire Hathaway (BRK.B) (BRK.A) purchased a large stake in Kroger (KR) during the final months of 2019 for two primary reasons. First, the company was (and remains) dirt cheap vs. its trading history. Second, it has become a leader in ecommerce, with customers ordering groceries online, followed by curbside or in-store pickup. Then, the coronavirus pandemic showed up and business for the nation’s biggest grocery chain has boomed. (The company maintains a #1 or #2 food retailing position in about 90% of its markets.)
With the November announcements of successful vaccine therapies coming to rescue the day, the first thought is Kroger’s fortunes will soon flatten or even sour. Investors seem willing to quickly sell shares, as the world hopefully gets back to normal sometime next year. Guess what? Kroger will still be feeding America in 2021, and the stock hasn’t risen much relative to Wall Street’s historic snapback to all-time highs overall.
In the end, I can argue Kroger remains a terrific buy, with an improving balance sheet and a leading, necessary retail position in much of the U.S. If you believe people will continue eating next year, like I do, perhaps you should review the cheap investment proposition the stock offers. Measured against the most overvalued Wall Street situation in history, per the market’s record pricing to trailing sales and GDP output, Kroger may be a worthwhile bargain to hold. Steady sales trends, regular profit margins, a strong balance sheet, and a nice dividend yield story have convinced me to own the name.
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 their earnings released our valuation models set a target (full value) price for The Kroger Company of $47.10 a stock (up from our 2nd quarter 2020 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 $47.10, a good entry point into the stock of Kroger Company would therefore be at $42.40 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 $47.10, a good entry point into the stock of Kroger Company would therefore be at $42.40 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 4th quarter 2020 earnings report towards in early March 2021