Citi Previews 1Q11 Results On KR

Citi is lowering its estimates but maintains its Hold rating and $23 price target on Kroger Co. KR in advance of the company's 1Q11 results, to be released Thursday. According to Citi, “We are lowering our 1Q11 EPS estimate for KR to $0.64, down from $0.67 prev. and vs. $0.58 LY. Our revised est. is in-line with consensus of $0.64 (see Fig. 1 for our detailed assumptions). We are also lowering our 2011 est. to $1.77, down from $1.92 previously, and vs. consensus of $1.92. While we expect moderate inflation to drive ID sales (IDS) in 1Q11, we believe rising gas prices and inflation that the company cannot pass through will negatively impact gross margins. We reiterate our Hold (2M) rating on KR, as accelerating inflation and a weak consumer have us concerned with the company's ability to pass along cost increases in 2H11.” KR closed yesterday at $23.41.