Kroger
Still, these positives were no match for the bearish market environment and rising recession risk which is crushing many parts of the market including retail stocks due to expectations that consumer spending will slow.
Overall, Kroger is down by about 25%, but its stock has been an outperformer among its peers and the broader market with a 5% gain YTD. In contrast, Walmart
Inside the Numbers
In its fiscal Q1, Kroger reported adjusted earnings per share of $1.45, beating expectations of $1.28 per share. Revenue for the quarter was $44.6 billion which topped estimates of $44.2 billion. Overall, earnings were up 22% and revenue increased by 10%.
However, some of these gains can be attributed to the rising price of gasoline. Without this, sales were up 4.1% compared to last year's Q1. Similar to Walmart and Target, the company noted a decline in sales of discretionary items, while sales of groceries and generic brands increased. In total, grocery sales increased by 5.2%, while 'Our Brands' rose by 6.3%.
Unlike Walmart and Target, Kroger did a better job in terms of its gross margins despite facing some of the major macro challenges. In essence, sales of high-margin items plunged, while sales of lower-margin food and gas are rising.
Management also emphasized a similar message saying that high rates of inflation was affecting consumers' shopping habits. According to CEO Rodney McMullen: "Rising inflation has consumers rethinking their shopping and eating habits. We are seeing different shopping behaviors based on how individual customers are experiencing the current inflationary environment."
Economists estimate that inflation has led household spending to increase by about $460 per month compared to last year. However, one mitigating factor is that online spending has collapsed, while in-person retail continues to increase. Kroger's relatively small share of e-commerce sales was a liability when digital sales were booming. Now, it's a factor in its recent outperformance.
