The US supermarket chain defies the difficult environment. Is the paper on the shot on?
With euphoria, investors reacted to the submission of Kroger’s quarterly figures on June 20. They show that the group with the difficult environment in the US retail is much better than many competitors.
After all, the mood of the US consumers due to the customs policy of US President Donald Trump had in the meantime clouded heavily before the consumer confidence recently recovered significantly, but was still miles below the level of the attempt in January.
Kroger is one of the leading food supermarket chains in the USA and one of the largest US individual dealers. The group benefits that low prices are a core element of its strategy.
In the first quarter of the fiscal year 2025/26 ended by May, sales fell by 0.3 percent to $ 45.12 billion. This was slightly below the estimates of the analysts of $ 45.30 billion.
Adjusted to the opening of new shops as well as fuel sales – a key figure that is important for analysts and investors – has increased by 3.2 percent. That was something about the expectations of 2.3 percent. Above all, pharmacy products and fresh food were in demand, and the digital business grew by 15 percent, although it still writes red numbers.
Customers bought larger packaging sizes and used coupons more often. In addition, the company’s own brands enjoyed increasing popularity.
In addition, adjusted profit before interest and taxes (EBIT) at Group level has climbed by 1.3 percent to $ 1.5 billion. The margin has improved slightly, from 3.3 percent to 3.4 percent.
The company has posted loads of $ 100 million because around 60 poorly running branches are to be closed over the next 18 months. However, this has no significant influence on the forecast for the year as a whole. At the same time, the company wants to accelerate the opening of new branches in promising locations.
In addition, the adjusted profit increased by 4 percent per share to $ 1.49, which was $ 1.46. However, the increase can only be attributed to the company’s powerful stock returns, which was the last time the number of shares was 8.7 percent below the previous year’s level.
In the fourth quarter of 2024/25, Kroger started carrying out a $ 5 billion accelerated shareholders’ buyback program, which should be completed by the third quarter of 2025/26 at the latest.
The “normal” share buyback program then continues over $ 2.5 billion, which is to be completed by the end of the fiscal year 2024/25 at the latest. These massive transactions – against the background of an IPO of currently $ 47.2 billion – have significant effects on the forecast for adjusted profit per share.
Forecast slightly raised
In the number template, interim boss Ron Sargent was satisfied, but emphasized that the economic environment remained uncertain. After the good figures for the first quarter, he still slightly raised the forecast for the area and fuel-adjusted sales for the fiscal year 2025/26 and is now assuming 2.25 to 3.25 percent instead of the previously planned 2.0 to 3.0 percent.
Sargent’s predecessor Rodney McMullen had surprisingly resigned on March 3, after the company had started an investigation for misconduct.
At the analyst conference, the new CFO David Kennerly also said that the sales of food had recovered in the past quarters. Kroger expects another gradual increase in the course of the fiscal year.
Otherwise, Sargent confirmed the rest of the view. According to this, the adjusted EBIT should continue to achieve $ 4.7 to $ 4.9 billion. In the middle of the range, this means an increase of 2.7 percent compared to the previous year’s value ($ 4.67 billion).
In addition, the interior chief is aiming for an adjusted profit per share of $ 4.60 to $ 4.80. The center of the span was somewhat below the expectations of $ 4.76. The center of the span corresponds to an increase of 5.1 percent, whereby the topic of share return purchases – as shown above – naturally plays a major role.
This is how the estimates look
Analysts forecast an increase in sales for the fiscal year 2025/26 that ended in February- i.e. not the area and fuel-adjusted sales- by 1.2 percent to $ 148.8 billion. In 2026/27 it is expected to go up to $ 153.2 billion.
The adjusted EBIT 2025/26 should increase by 1.4 percent to $ 4.74 billion. However, this is slightly below the middle of Sargents span ($ 4.8 billion). For 2026/27, an increase is expected by 4.6 percent to $ 4.96 billion. The margin would be 3.2 percent.
What’s next with the stock?
After the share had shot up to new record highs after the number template, profit was then taken.
This means that the market value is $ 47.2 billion. Including the net icing of $ 13.5 billion, the Enterprise Value (EV) is $ 60.7 billion.
This corresponds to the 12,2 times the EBIT predicted by analysts for 2026/27. I think that is actually a sufficient evaluation for a company with fairly weak sales growth, the operational margin of which is supposed to stagnate at a relatively low level.
And the 2026/27 kGV is 13.6.
However, I assume that the Kroger share will soon continue the record ride. In addition to the high -altitude flight on the overall market, the planned trillion dollar tax reduction program from Trump plays a major role.
Should he bring it through the congress in the next few days and come into force according to his signature, many Americans would have more money in their pockets that they could use not least to shop at Kroger.
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