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Why is Kroger's (KR) Stock Plummeting Today?

Maher Syed
Updated

Kroger KR released its fourth quarter earnings this morning, posting a beat on our consensus of $0.54.  The company actually posted EPS of $0.57 for the quarter, which represents a 5.56% beat on our consensus estimate. 

In spite of the positive earnings numbers, shares are down 9% today.  This is due to the fact that revenues missed investor expectations.  The grocery store chain posted revenues of $26,165 million, which is lower than our revenues consensus estimate of $26,193 million.  This is a small miss on our consensus, but many other investors had higher revenues expectations for the company.

It should be noted that revenues this quarter were supported by six weeks of performance from Roundy’s, a grocery chain acquired in late 2015.  Kroger expects its EPS for this fiscal year to fall between $2.18 and $2.28.  For this year, our consensus currently estimates EPS of $2.23.

Identical supermarket sales (excluding fuel sales but including six weeks of performance from Roundy’s) were up 3.7% over the quarter, but still fell below the expectations of many investors.  Indeed, this is a significant decline compared to the 6% of identical supermarket sales growth seen in Q4 of the last fiscal year.

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Kroger predicts slower sales growth in 2016, primarily due to lower inflation expectations.  The grocer sees identical supermarket sales (excluding fuel) growing between 2.5%-3.5% this year.  Kroger stock is currently a Zacks Rank #2 (Buy), but it is subject to change after the earnings release.

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