The company continues to see a tailwind from the ongoing Covid-19 pandemic
Results for the Kroger Co. (NYSE:KR) have been excellent
year to date. The catalyst for this growth has been the ongoing Covid-19
pandemic, which has forced consumers to eat more meals at home. The pandemic
doesn't appear to be lightening up as the number of cases continues to grow
nationwide. More states have been imposing restrictions on indoor dining, if
they even allow for people to eat inside of restaurants.
That said, shares of Kroger have lost more than 15% over the
last three months while the S&P 500 is 6% higher.
On the heels of first and second-quarter results where
earnings per share grew a combined 68% and revenue improved 10%, Kroger's
third-quarter was also quite strong. Is this, plus the decline in share price,
enough to buy shares of the company?
Quarterly highlights and valuation analysis
Kroger reported third-quarter earnings results on Dec. 3.
The grocery store chain's adjusted earnings per share of 71 cents was an
increase of 24 cents, or 51%, from the prior year. This was also 5 cents ahead
of what Wall Street analysts had expected. Revenue grew 6.3% to $29.7 billion,
but was $242 million short of estimates.
Comparable sales excluding fuel were higher by 10.9%
compared to consensus estimates of 9.3%. Outside of fuel, which saw a 13%
decline in gallons, growth was broad-based. Kroger has seen real success with
its own brands. For example, brand growth was 8.6% in the quarter, but Private
Selection grew 17% while Simple Truth was 15% higher. Digital sales more than
doubled, adding 4.6% to comparable sales.
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