Kroger (NYSE: KR) answers some important questions for investors. The supermarket giant will soon announce its final quarterly results for fiscal 2020 to end this record year of growth amid increased demand for food and other staples during the pandemic.
CEO Rodney McMullen (Rodney McMullen) and his team may be optimistic about their near-term growth prospects. However, the earnings outlook is not optimistic.
Let’s take a closer look at what investors can see in Kroger’s March 4 announcement.
Kroger’s latest report covers the sales period that lasted until the beginning of November when the series’ business performance improved. Of course the growth has slowed from 15% to 11%. Kruger, however, beat Walmart (NYSE: WMT), the main competitor in most markets.
The supermarket giant has made higher demands this time around, saying its sales in the central US market have increased over the holiday season. We’ll find out this week if Kroger made a similar push. The company’s goal is to grow by 14% this year.
If you achieve this goal, seek management to learn about popular brands in stores such as Simple Truth and the fast-growing e-commerce sector. A win in these areas could allow Kroger to resume market share growth in 2020 after a decline in the previous year.
As demand continues to increase and the efficiency of the display and production platform improves, Kroger’s profits have increased dramatically. Operating profit in the first three quarters of 2020 was $ 2.9 billion, which is 2.9% of sales. In comparison, in the same period last year, it reached $ 1.7 billion, with a profit margin of 1.8%.
Check out more good news on this topic. Kroger’s goal is to add an additional $ 1 billion in revenue in the fourth quarter, bringing annual operating income to just over $ 4 billion, compared to $ 2.3 billion in 2019 and $ 2.6 billion in 2018. Free cash flow could improve to $ 3 billion. Billions of dollars, compared to 1.7 billion dollars last year.
When Walmart forecast rising costs in the coming years in mid-February, it was supposed to dampen morale in the FMCG nuclear industry. The retailer said revenues could remain stable in 2021, and capital improvement projects will consume cash flow. The good news is that Walmart believes that with these investments, Walmart can essentially achieve higher sales growth.
The outlook for Kruger may be in the same situation this week. After a record peak last year, the chain is likely to achieve moderate revenue growth in 2021. But the bigger question is whether management is as conservative in terms of cash flow and earnings expectations as Wal-Mart did earlier this month.
If so, despite a 50% increase in earnings last year, investors should not expect to pay large dividends or buy back shares. However, it was only a temporary outage, giving Kroger more room to protect its wider sales portfolio. Therefore, shareholders should not view Thursday’s weak earnings outlook as a negative sign. Conversely, this could mean that Kroger has laid the foundation for faster revenue growth and higher profits in the long run.