Kroger (KR) Q1 2025 earnings summary

Executive summary

• Achieved a solid start to Q1 2024 with grocery business outperforming expectations, offsetting weaker fuel and health and wellness results, and driving growth in households and customer visits through strong store execution and omni-channel experience.

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

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

• Alternative profit businesses, especially retail media and Kroger Precision Marketing, delivered strong growth and expanded capabilities, keeping on track for over 20% annual growth.

• Announced sale of Kroger Specialty Pharmacy for $485 million, expected to close in H2 2024, and amended divestiture agreement with C&S Wholesale Grocers in connection with the proposed Albertsons merger.

Financial highlights

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

• Operating profit was $1,294 million, down from $1,470 million year-over-year; adjusted FIFO operating profit was $1,499 million, down from $1,669 million.

• Adjusted EPS was $1.43 per diluted share, down from $1.51 year-over-year; GAAP EPS was $1.29.

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

• LIFO charge was $41 million, down from $99 million in the prior year quarter, reflecting lower inflation expectations.

Outlook and guidance

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

• Adjusted EPS for Q2 expected to decline at a rate similar to Q1, due to ongoing pharmacy profitability pressures.

• Identical sales expected to improve throughout the year, aiming for the 2%-4% long-term model range by the second half.

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

• Free cash flow forecasted at $2.5–$2.7 billion; capital expenditures at $3.4–$3.6 billion.