Kroger's 1Q23 Earnings Bolstered By Strategic Initiatives: Analyst Upholds Outperform Rating

Telsey Advisory Group analyst Joseph Feldman reiterated an Outperform rating on the shares of Kroger Co KR with a price target of $55.

Kroger reported strong 1Q23 earnings and maintained its 2023 adjusted EPS guidance. The strong adjusted EPS was driven by a higher-than-anticipated operating margin of 3.5%. The analyst added that ID sales reflected the benefit from inflation, continued healthy at-home consumption, and gains from strategic initiatives.

The adjusted EBIT margin expanded 10 basis points to 3.5%, helped by the gross margin improvement of 70 basis points to 22.3%, resulting from higher penetration of private brands, lower sourcing and supply chain costs, and benefits from the termination of Express Scripts agreement, noted the analyst.

The analyst believes Kroger is on the right path and should continue to benefit from its Leading with Fresh and Accelerating with Digital initiatives.

KR should gain from focus on fresh, digital growth and profitability, personalization, efficient cost management, and greater reliance on data analytics, technology, and alternative profit sources, said the analyst.

Price Action: KR shares are trading lower by 2.74% at $45.91 on the last check Thursday.