Kroger beats earnings estimates as food prices level out

Kroger (KR) beat both top and bottom line estimates in its latest earnings, as more shoppers visited its stores while food prices leveled out.

Yahoo Finance's Brad Smith and Madison Mills break down the grocery giant's earnings and what they signal about the overall state of the consumer.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Melanie Riehl

Video transcript

Kroger beating on estimates on the top and bottom line in the latest quarter earnings as more shoppers visited its stores as food prices starting to level out.

Our very own Kroger beat reporter Brad Smith is still with me to discuss this name.

It's interesting.

We're seeing shares kind of fluctuating a little bit this morning off of this mixed report.

Brad, it seems like a PS identical sales, the estimates, But we have muted gross margin growth.

What are you looking at in this earnings print that sticks out to you?

Just put a number on that gross margin.

It was 2020 22.4% of sales for the first quarter here, uh, and excluding fuel decreased by about seven basis points compared to the same period last year.

And they said that the decrease in that rate was primarily attributable to lower pharmacy margins, increased price investments and then, uh, partially offset by some favourable product mix reflecting their our brands margin performance.

And you think about that particular part of the business, too, for crow and for Walmart for target, many of them leaning into so many of these home grown brands as well, where consumers are pushing back on price for some of the other sourced assortment and mix that Kroger target WalMart, especially within their own positioning.

I'll throw whole foods in there as well.

All of them have leaned into those larger brand, uh, and considerations and and partnerships over the years.

So all of those things considered leaning more into the homegrown or the private label and then addition here, One of the other considerations that this company is talking about is the macro here, trying to deliver value at a time where many consumers, they're saying, need it more than ever.

Affordable prices is what consumers are looking for.

They're looking for personalised promotions as well.

So those promotions certainly can put a dent in some of that margin element that we started off this conversation with here, um, and then also just talking about some of those investments, just putting a little bit more colour on that, trying to make sure that even despite whatever economic cycle that they're in, that they're investing further in the employee experience, which is really interesting to hear from the company here, trying to make sure that they're also retaining a certain base of employees operating these stores and knowing, um, how much they need to deliver upon and then, just lastly, one of the sexiest parts of the business for me?

Yes, groceries can be sexy, especially when you think about the digital sales components of how people are engaging, whether that be, buy online, pick up in store or having somebody pick and pack, and then just bring it to you or deliver it to you.

Digital sales grew more than 8% delivery and pick up, combining for double digit growth right there.

So, uh, all right, I've exhausted, uh, the word count on this one.

But that's for you right now.

I love it.

And it's a great point, Brad, because the grocery market is definitely a look at the consumer and a look at our economy and a look at the Fed.

It tells us a lot.

So I appreciate you joining us for that.

Thanks so much, Brad.

And thanks for joining me at the top of our show.

We appreciate it