Kroger’s first-quarter earnings lack punch

Wall Street was hoping Kroger would raise expectations in 2023, but the Cincinnati-based grocer stood firm on its original projections following modest first quarter growth.

Total sales during the opening months of the year were $45.2 billion, a slight increase compared to Q1 2022 ($44.6 billion). Sales were up 3.5% year-over-year. Kroger’s Q1 operating profit was almost $1.5 billion and its adjusted EPS stood at $1.51 billion for the quarter.

Both lower supply chain costs, as well as Kroger’s decision to  source products closer to its distribution centers contributed to the company's overall sound sales figures in Q1. 

Digital sales rose 15% and delivery sales went up 30%. In late May, the grocer said it was expanding its ecommerce network in Northern Kentucky with the addition of 2,000 square feet of space that will serve as a home delivery spoke site to its existing automated Ocado hub facility in Monroe, Ohio.

For the rest of the year, Kroger still expects identical sales growth to fall within the 1-2% range with underlying growth of 2.5-3.5%. Adjusted operating profit could be as high as $5.2 billion and capital expenditures are expected to be between $3.4 billion and $3.6 billion.

Kroger also announced in Q1 that it would be expanding its retail media strategy with the addition of digital screens that facilitate video advertising across 500 stores.

Related:Kroger, Albertsons giant footprint in Northwest might have to shrink

The grocer, however, struggled with a new payroll system earlier this year, and in one instance a group of workers were incorrectly paid a bigger bonus. Those workers are now trying to return the money.