The Kroger Co (KR) Q1 2025 earnings summary

Executive summary

• Achieved solid Q1 2024 results with grocery and digital channels driving growth, offsetting weaker fuel and health/wellness segments; customer visits and household counts increased due to strong store execution and omni-channel experience.

• Digital sales grew over 8% year-over-year, led by double-digit growth in delivery and pickup; digitally engaged households rose 9% and digital coupon downloads increased 18%.

• Launched new Field & Vine berry brand, introduced 346 new Our Brands items, and achieved record quarterly floral sales and pickup fill rate.

• Announced sale of Kroger Specialty Pharmacy for $485M, with assets classified as held for sale and a $31M non-recurring tax benefit recognized.

• Advanced Albertsons merger with amended divestiture agreement, increasing store divestitures to 579 to address antitrust concerns.

Financial highlights

• Q1 2024 sales were $45.3B, up 0.2% year-over-year; identical sales excluding fuel grew 0.5%.

• Adjusted FIFO operating profit was $1.499B, down from $1.669B last year; adjusted EPS was $1.43, down from $1.51.

• Gross margin was 22.4% of sales; FIFO gross margin rate (ex-fuel) decreased 7 basis points, mainly due to lower pharmacy margins and increased price investments.

• LIFO charge was $41M, down from $99M in the prior year quarter.

• Dividend per share increased to $0.29 from $0.26 year-over-year.

Outlook and guidance

• Reaffirmed full-year 2024 guidance: identical sales without fuel growth of 0.25%–1.75%, adjusted FIFO operating profit of $4.6–$4.8B, and adjusted EPS of $4.30–$4.50.

• Adjusted free cash flow projected at $2.5–$2.7B; capital expenditures of $3.4–$3.6B; tax rate expected at 23%.

• Margin expansion expected to offset pharmacy headwinds, with improvement anticipated in the second half of 2024.

• Inflation expected to remain slightly above 1% for the year, with no broad-based deflation.