Kroger Earnings: Promotions Help Drive Traffic Gains While Margins Prove Resilient

As we expected, narrow-moat Kroger adequately navigated disinflationary headwinds and value-seeking consumers in its fiscal fourth quarter. Identical sales (excluding fuel and effects of the terminated Express Scripts agreement) expanded 0.1% after lapping a difficult 6% prior-year comparison. Management said traffic increased as promotions lured consumers back to its stores, and it reaffirmed its commitment to volume growth in fiscal 2024. While top-line results did not come as a surprise to us—full-year identical sales growth of 2.3% was in line with management’s guidance of 2.1%-2.5%—full-year adjusted earnings per share of $4.76 outpaced our $4.52 forecast as margins proved resilient amid favorable private-label penetration and lower supply chain costs.