Kroger Co. (NYSE:KR), the biggest U.S. supermarket operator, reported on Thursday an increase in quarterly profit and raised its annual profit forecast.


The company said it earned $481 million, or 92 cents a share, last quarter, compared with a profit of $439 million, or 78 cents a share, a year earlier. Analysts had been calling for EPS of 0.88 cents. Revenue rose 3.4 percent to $30 billion, which is slightly below the Street’s expectation of $30.2 billion. Excluding fuel, sales were up 3.8 percent.

Key Takeaways From Kroger First Quarter 2013 Results

Achieved 38th consecutive quarter of positive identical supermarket sales

Total sales grew 3.4 percent, softer than the Street’s 3.9 percent estimate. ID sales growth ex-fuel was 3.3 percent, however, representing a 30 basis point  acceleration  from 4Q12 and higher than the Street was expecting.

Expanded operating margin

The gross margin increased 10 basis points Y/Y to 20.6 percent, higher than the Street’s 20.3 percent estimate. Excluding fuel, the FIFO gross margin  decreased 15 basis points Y/Y, the smallest such decline since 1Q11. The SG&A margin came in ahead of the Street at 15.3 percent (vs. 15.1 percent). Overall, the EBIT margin was 2.9 percent (vs. the Street’s 2.8 percent) a 10 basis point Y/Y increase.

1Q13 EPS beat the street

The company posted adjusted 1Q13 EPS of $0.93, above the Street’s $0.88 estimate.  The beat was attributed mostly to a stronger-than-expected gross margin and a lower share count, partially offset by lower total sales growth (though ID sales were impressive) and a higher SG&A margin.

FY13 guidance raised
The company boosted its EPS guidance for the year to $2.73-$2.80 from $2.71-$2.79 (Street = $2.77). KR continues to expect ID sales ex-fuel for the year to be between +2.5 percent and 3.5 percent.

Buybacks  accelerated

The Kroger Co. (NYSE:KR)’s strong financial position has allowed the company to return more than $1.3 billion to shareholders through share buybacks and dividends over the last four quarters. During the first quarter, Kroger repurchased 4.5 million common shares for a total investment of $146 million.

Capital investment

Capital investment totaled $646 million for the first quarter, compared to $557 million for the same period last year.

Increased return on invested capital

Return on invested capital was 13.5 percent compared to 13.4 percent during the same period last year

Net total debt

Net total debt was $7.9 billion, an increase of $160 million from a year ago. The Kroger Co. (NYSE:KR)’s net total debt to adjusted EBITDA ratio was 1.85 compared to 1.91 during the same period last year.