Grocery chain operator
The Kroger Company (NYSE: KR) stock has been amazingly resilient dispelling popular belief the pandemic benefactor would experience a reversal during the reopening trend. The operator of 2,800 stores in 25 states was a clear
pandemic winner during the pandemic as food and toiletry shortages caused a spike in traffic. As the pandemic wanes with the acceleration of
COVID vaccinations, investors were concerned that consumer shopping habits would return to normal and sales would see a reversion. However, it appears that the pandemic has changed consumer habits for the sustainability of new elevated traffic levels. The Company is also pursuing a more ESG oriented and
sustainable and natural food strategy that is proving to be more effective to the top and bottom lines. The Company has transformed for the better as a result of the changes made during the pandemic with more digital innovation and healthier food trends embracing the
natural and sustainable
plant-based food revolution. Prudent investors looking for exposure in the new consumer grocer normal can watch for opportunistic pullbacks in the shares of The Kroger Company.
Q1 Fiscal 2021 Earnings Release
On June 17, 2021, Kroger released its fiscal first-quarter 2021 results for the quarter ending April 2021. The Company reported an earnings-per-share (EPS) profit of $1.19 excluding non-recurring items versus consensus analyst estimates for a profit of $0.99, a $0.20 beat. Revenues fell (-$0.06%) year-over-year (YoY) to $41.3 billion beating analyst estimates for $39.87 million. Digital sales rose 16% and the two-year stack rose 108%. Kroger CEO Rodney McMullen commented, "Kroger's strong execution delivered identical sales results in the first quarter that exceeded our original expectations. Customers are responding to the investments we have made in digital, as evidenced by our triple-digit growth in digital sales since the beginning of 2019. We were disciplined in driving costs out of the business and we achieved record growth in Kroger's alternative profit business, demonstrating the power and attractiveness of our long-term model. We are raising our guidance based on the strength of our results and we remain confident in our ability to deliver consistently attractive total shareholder return."
Upside Guidance
Kroger provided upside guidance for full-year 2022 with EPS expected between $2.95 to $3.10 compared to $2.83 consensus analyst estimates. The Company also approved a $1 billion share buyback program.
Conference Call Takeaways
CEO McMullen set the tone, While the COVID-19 health crisis has not ended, this is the first quarter where we saw significant signs of recovery and the beginning of a return to what we are hopeful will be a new normal.” The new consumer normal is a theme the Company has focused on and CEO McMullen described in refreshing detail, “Our customers are in a time of transition. During the quarter, we began to see some pre-pandemic habits resume. For example, smaller holiday gatherings are likely to fade as more than half of our shoppers believe holidays will return to normal by the 4th of July. We are also seeing customers shop more frequently as COVID restrictions ease. Importantly, we saw a continuation of several pandemic trends. This includes heightened digital engagement across demographics; expanded consumption in key fresh areas like meat, produce, and natural foods; and trading up to more premium products. New trends are emerging as well as customers settle into new routines. In a recent survey of our customers, a remarkable 92% of the people say they enjoy cooking the same or more than they did pre-COVID. And as people’s busy social lives pick up, more customers are looking for convenience in cooking options. We continue to utilize our data to understand those behaviors that are more permanent in nature. Whether customer habits are returning, hardening, or emerging, we will continue to meet the customer where they are and use our data science expertise to be where they are going.” He detailed its digital innovation as its app has made over 258 billion personalized recommendations to customers. The Company is also taking part in the return to normal by administering over five million COVID vaccinations. He concluded with details about its committed and loyal workforce, with more than 70% of store directors starting off as part-time clerks,” We are building a connected culture that embraces agility and collaboration, and that celebrates and incentivizes life-long learning and growth.”
KR Opportunistic Pullback Levels
Using the rifle charts on weekly and daily charts can provide a near-term perspective of the playing field for KR stock. The weekly rifle chart is compressing as the Bollinger Bands (BBs) contract. The weekly breakout peaked just below the $24.49 Fibonacci (fib) level as the weekly market structure high (MSH) sell triggered under $19.70. Incidentally, the weekly market structure low (MSL) buy triggered above the $18.30 level. The weekly 5-period moving average (MA) is sloping down at $20.06 as it overshoots the 15-period MA at $19.76. The daily rifle chart has been in a downtrend with a falling 5-period MA at $19.65 with a stochastic mini inverse pup pointing at the daily lower BBs at the $18.58 fib. Prudent investors can monitor for opportunistic pullback levels at the $18.58 fib, $17.96 fib, $17.51 level, $16.69 fib, $15.43 fib, and the $14.09 fib. The upside trajectories range from the $22.51 level up to the $29.00 fib level.
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