Kroger stock jumps following Q4 earnings report

Kroger stock spiked on Thursday morning with shares hitting a high of $54.75 by around 11 a.m., up 8.44%, upon release of its Q4 earnings report that handily beat analyst predictions on its earnings per share.

The company reported earnings of $1.34 on revenue of $37.06 billion for the quarter ended January, coming in far above analyst estimates of $1.13 per share.

Revenue was up 6.44% year over year, and Kroger said it anticipates net earnings per diluted share of $4.30 to $4.50 per share in fiscal year 2025. 

Adjusted earnings for the year came in at $4.76 per share, delivering an adjusted earnings per share growth of 8%.

Identical sales, when not including fuel sales, were down 0.8% for the quarter, but up 0.1% when including fuel sales. For the full year, identical sales were up 0.9%, and up 2.3% when including fuel, the company reported. 

The grocery chain anticipates that it will maintain a “strong free cash flow” and will continue to invest in the business “to drive long-term sustainable net earnings growth, as well as maintaining its current investment grade debt rating.” 

Additionally, Kroger said it expects to continue to pay a quarterly dividend, which is likely to increase over time, subject to approval by its board of directors. “Kroger has paused its share repurchase program to prioritize de-leveraging following the proposed merger with Albertsons,” the company noted.

Kroger's net total debt to adjusted EBITDA ratio is 1.33, excluding the 53rd week, compared to 1.56 a year ago. The company's net total debt to adjusted EBITDA ratio target range is 2.30 to 2.50. 

Kroger Chairman and CEO Rodney McMullen said in a press release that the company continues to lower prices and build brand loyalty with personalized promotions and rewards. 

The company also reported that over the course of 2023, Kroger increased its average hourly wage to just under $19 and a rate of almost $25 when including benefits. That’s a 33% increase in the rate over the past five years, the company said. 

“Over the last five years, we've made historic investments in associate wages, benefits, and career development opportunities, including significant investments to help stabilize associates' future pension benefits,” McMullen said in a press release. 

In 2023, Kroger invested roughly $500 million in wage increases, putting the total investment at $2.4 billion since 2018, the company noted. 

Kroger said in its earnings report that total company sales reached $150 billion in 2023, up 1.1%, excluding fuel sales and an extra week in the year, from the previous year.

The company noted that among its 2023 highlights was the introduction of more than 700 new Kroger brand private-label products known as Our Brands. That includes the expansion of the grocer’s Mercado and Smart Way lines. McMullen said in the earnings call on Thursday that Kroger plans to launch more than 800 more private-label products in 2024. 

“This year's addition of the Hispanic-inspired Mercado line to our brands’ portfolio is an example of how our brands can innovate in categories that meet our customers’ evolving needs and accelerate growth,” McMullen said. 

The company also touted the growth of its digital business in 2023, reporting $12 billion in annual online sales, a 12% growth rate year over year, the company said. “Customers value the ability to shop on their own terms with zero compromises,” McMullen said. “And we are increasing the number of omnichannel households in our ecosystem. Customers who shop both in-store and online spend three to four times more compared to in store-only shoppers.”

McMullen said the company would remain relatively silent on the topic of its proposed $24.6 billion merger with Albertsons, due to the multi-state lawsuit filed by the FTC, as well as those in Colorado and Washington state.  

“While we were disappointed about the FTC’s recent attempt to challenge our merger, we were not surprised given the current political environment,” McMullen said. “Our track record and previous mergers is clear. Kroger lowered prices, invested in associates, improved the customer experience, and deepened its connections with the communities we serve.”

He added that hearing dates have not been set for the various legal challenges, but the company expects the cases to proceed sometime in the mid to late summer. 

“We remain excited about the future of our combined companies and we look forward to explaining the benefits of our merger,” McMullen said.