Kroger's Overall Sales Flat in Q2

On the heels of announcing the next step in its merger with Albertsons, Kroger has shared its second quarter fiscal results.

Total company sales were $33.9 billion in the second quarter, ended Aug. 12, compared to $34.6 billion for the same period last year. Excluding fuel, identical sales increased 1.1% compared to the same period last year.  The grocer grew its digital sales 12% year-over-year, and increased total and loyal customer households. Delivery sales increased by 24% over Q2 2022.

Gross margin was 21.8% of sales during the reporting period, and operating loss was $479 million. The company also saw adjusted FIFO operating profit of $989 million and adjusted EPS of $0.96.

"The strength and diversity of Kroger's business model is delivering consistent results in what remains a challenged environment,” said Kroger CEO and Chairman Rodney McMullen. “By investing in price and providing more personalized offers, we are helping customers stretch their budgets and manage the ongoing effects of reduced government benefits, inflation and higher interest rates. Kroger is funding these investments by collaborating with vendors to deliver exceptional value, managing costs and growing alternative profit businesses.”

Included in Kroger's results this quarter was a $1.4 billion charge related to a nationwide opioid settlement framework. The timing of the settlement payments will be over 11 years, most of which are tax deductible. The grocer said the settlement and the payment terms would not affect its ability to complete its proposed merger with Albertsons.

Looking ahead, Kroger reaffirmed its full-year 2023 guidance, including identical sales without fuel of 1.0-2.0%, with underlying growth of 2.5-3.5% after adjusting for the effect of Express Scripts. Adjusted net earnings per diluted share of $4.45-$4.60 are expected, including an estimated benefit from the 53rd week of approximately $0.15.

“We are growing households as our associates are providing a full, fresh and friendly shopping experience across our seamless ecosystem,” added McMullen. “While we expect the environment to remain challenged going forward, we are committed to delivering exceptional value for our customers and investing in our associates, and by doing so, we expect to generate attractive returns for shareholders."