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CINCINNATI — Kroger Co. recorded a modest increase in net profit for the first quarter of 2012, but the results exceeded the expectations of management as well as analysts, and the company raised its guidance for full-year earnings per share (EPS).
Kroger Co. recorded a modest increase in net profit for the first quarter of 2012, but the results exceeded the expectations of management as well as analysts, and the company raised its guidance for full-year earnings per share (EPS).
At the same time, Kroger’s board of directors approved a new $1 billion share buyback program.
Net earnings rose 1.6% to $439.4 million, while earnings per diluted share increased to 78 cents from 70 cents in the fiscal 2011 quarter. Analysts surveyed by FactSet expected EPS of 72 cents, on average.
Sales gained 5.8% to $29.06 billion as identical-store sales, excluding fuel, rose 4.2%. Including gasoline sales, identical-store sales grew 5.5%. According to the company, this marked the 34th consecutive quarter of positive identical-store sales growth for the grocer.
Gross margin contracted 71 basis points to 20.54% of sales, while operating, general and administrative expense was reduced by 43 basis points to 15.36%. However, excluding fuel sales, FIFO gross margin fell 53 basis points while OG&A expense decreased 27 basis points year over year. Nevertheless, operating profit inched up just 0.4% to $814.1 million for the quarter, and earnings before income tax expense were basically flat at $673.2 million.
"Kroger’s solid first quarter performance demonstrates that our Customer First strategy continues to resonate with customers," said chairman and chief executive officer David Dillon. "Our core business is growing, and we are rewarding shareholders through earnings growth, increasing dividends over time and share buybacks."
Based on the strong performance, executives have raised Kroger’s EPS guidance for fiscal 2012 to a range of $2.33 to $2.40 per diluted share. Management’s original guidance for the year was $2.28 to $2.38 per diluted share.
"We were very pleased with the results of the first quarter," Dillon went on. "We exceeded our expectations, and as a result raised our earnings-per-share guidance for the year. Through our focus on the customer we will continue to stand out among food retailers and drive loyalty, cash flow and earnings growth in 2012 and beyond."
The company received help in achieving its new earnings target from the board of directors, which approved a $1 billion share repurchase program to replace the prior authorization, which was exhausted on June 12. Since January 2000 Kroger has spent $8.5 billion on share repurchases.
