Kroger Co. has reported its first-quarter 2025 results, highlighting a 3.2% increase in identical sales without fuel, reaching $45.1 billion in total company sales, a 3.7% increase excluding fuel, Kroger Specialty Pharmacy, and adjustment items. Earnings per share remained steady at $1.29, with adjusted EPS rising to $1.49 from $1.43 in the previous period. The company's operating profit reached $1,322 million, while adjusted FIFO operating profit stood at $1,518 million, up from $1,499 million.
Notably, gross margin improved to 23.0% of sales from 22.0% in the same period last year, with the FIFO gross margin rate increasing by 79 basis points, driven by the sale of Kroger Specialty Pharmacy, lower shrink, and supply chain costs. However, the operating, general, and administrative rate, excluding fuel and adjustment items, increased by 63 basis points, primarily due to the sale of Kroger Specialty Pharmacy and an accelerated contribution to a multi-employer pension plan.
The company recognized an impairment charge of $100 million related to the planned closing of approximately 60 stores over the next 18 months, but expects a modest financial benefit from these closures, committing to reinvest the savings back into the customer experience.
Looking ahead, Kroger updated its full-year 2025 guidance, raising identical sales without fuel expectations to a range of 2.25% to 3.25% and reaffirming adjusted FIFO operating profit of $4.7 billion to $4.9 billion, adjusted net earnings per diluted share of $4.60 to $4.80, adjusted free cash flow of $2.8 billion to $3.0 billion, capital expenditures of $3.6 billion to $3.8 billion, and an adjusted effective tax rate of 23%.
Kroger also remains committed to its capital allocation strategy, expecting to continue generating strong free cash flow, maintaining its investment grade debt rating, paying quarterly dividends, and completing a $5 billion accelerated share repurchase program by no later than the fiscal third quarter of 2025.
The company's net total debt to adjusted EBITDA ratio stood at 1.69, compared to 1.25 a year ago, within its target range of 2.30 to 2.50, providing ample opportunities to invest in the business and enhance shareholder value.
CFO David Kennerley expressed confidence in the raised guidance, citing strong sales results and positive momentum, while acknowledging the uncertain macroeconomic environment.
As a result of these announcements, the company's shares have moved -0.65% on the market, and are now trading at a price of $65.52. Check out the company's full 8-K submission here.
