Kroger Reports Slight Sales Decline but Growth in Pharmacy and eCommerce for Q1 Fiscal 2025

Kroger Co. reported its financial results for the first quarter of fiscal 2025, revealing a slight decline in total sales but notable growth in specific segments. Total sales reached $45.1 billion, a decrease of 0.3% compared to $45.3 billion in the same period last year. Excluding fuel sales, total sales increased by 1.2% to $40.8 billion, driven by a 3.2% rise in identical sales, excluding fuel and adjusted items. The company attributed this growth to strong performances in pharmacy, eCommerce, and fresh food categories, with eCommerce sales alone increasing by 15%.

In terms of profitability, Kroger's operating profit rose to $1.3 billion, a 2.2% increase from $1.3 billion in the previous year. Adjusted FIFO operating profit also saw a modest increase of 1.3%, reaching $1.5 billion. However, net earnings attributable to Kroger decreased by 8.6% to $866 million, or $1.29 per diluted share, consistent with the previous year’s earnings per share. The decline in net earnings was influenced by various charges, including $100 million related to planned store closures and $22 million for opioid settlement charges.

Kroger's operational metrics showed a mixed performance. The company reported a cash flow from operations of $2.1 billion, down 8% from the prior year, while cash and temporary cash investments increased by $779 million to $4.7 billion. The company also announced plans to close approximately 60 stores over the next 18 months, which is expected to yield modest financial benefits. Additionally, Kroger made a $60 million contribution to multi-employer pension plans, which contributed to a rise in operating, general, and administrative expenses.

Strategically, Kroger continues to focus on enhancing its eCommerce capabilities and expanding its store network. The company opened, expanded, or relocated 27 supermarkets and completed 210 remodels in the past year. Kroger's management remains optimistic about the future, emphasizing a commitment to investing in projects that maximize returns on invested capital while maintaining its investment-grade credit rating. The company expects to generate strong free cash flow and continue returning capital to shareholders through dividends and share repurchases.

Looking ahead, Kroger's management expressed confidence in its value creation model, which aims for a total shareholder return of 8% to 11% over time. The company is focused on leveraging its strengths in fresh products, private label brands, and personalized customer experiences to drive growth. Despite the challenges posed by market conditions and competitive pressures, Kroger's strategic initiatives position it well for continued success in the evolving retail landscape.