Grocery chain giant Kroger (KR 2.71%) reported mixed fourth-quarter and full-year 2024 results on Thursday, March 6. Adjusted EPS was $1.14, topping consensus expectations while matching last year's figure. Q4 revenue of $34.3 billion was below the $34.75 billion estimate and fell 7% year over year. Operating profit fell nearly 24% year over year.
The overall performance was solid, but the report raised concerns about profitability. It comes just two days after CEO Rodney McMullen abruptly resigned after an investigation into his personal conduct. The Chairman of the Board, Ron Sargent, has stepped in as interim CEO.
| Metric | Q4 2024 | Analysts' Estimate | Q4 2023 | Change (YOY) |
|---|---|---|---|---|
| Adjusted EPS | $1.14 | $1.11 | $1.34 | (15%) |
| Total sales | $34.3 billion | $34.75 billion | $37.1 billion | (7%) |
| Operating profit | $912 million | N/A | $1.19 billion | (23.6%) |
| Identical sales growth* | 2.4% | N/A | (0.8%) | 3.2 pps |
Source: Kroger. Note: Analyst consensus estimates for the quarter provided by FactSet. *Identical sales growth excludes fuel purchases. YOY = Year over year.
An Overview of Kroger's Business
Kroger operates over 2,700 supermarkets across 35 states under multiple grocery brands with formats ranging from supermarkets and multi-department stores to marketplace stores. A key strategy is its diverse retail format, integrating pharmacies and fuel centers into many locations, which helps capture broad market segments and reduce single-stream revenue dependency. In 2023, these efforts resulted in $31 billion in sales from Kroger's private label brands, known as "Our Brands".
Kroger has focused significantly on digital transformation, building a seamless ecosystem that supports Pickup, Delivery, and Ship services, with digital channels increasing by 11% year over year. It also invests heavily in personalized customer experiences through its loyalty program, connecting up to 95% of transactions to customer data for tailored services.
NYSE: KR
Key Data Points
Notable Developments in Q4 2024
Kroger reported a 7% drop in total sales for the fiscal 2024 fourth quarter (ended Jan. 31, 2025), mainly affected by reductions in fuel and pharmacy sales. Despite the decrease, the company's strategy to boost digital and private label offerings paid off, with same-store sales rising by 2.4%, excluding fuel. Operating profit dropped to $912 million from $1.19 billion last year, with a drive for digital innovation contributing to increased operational costs.
Kroger’s Alternative Profit Businesses, including advertising and data services, contributed $1.35 billion to operating profit, driven by a 17% rise in media-related revenue. Digital sales marked an 11% growth, reflecting investment in seamless shopping environments. Meanwhile, the expansion of "Our Brands" with over 900 new products underlined continued focus on margin-boosting private label strategies.
Operating, General, and Administrative Expenses rose due to wage investments and incentive plans, impacting overall profitability. A LIFO (Last-In, First-Out) accounting charge of $30 million suggested inventory cost pressures, against last year's $18 million credit. No changes were reported in dividend policy this quarter; dividends remain declared at $0.32 per share.
Looking Ahead
Strategically, Kroger anticipates identical sales (without fuel) to grow 2%-3% in fiscal 2025. Adjusted FIFO (First-In, First-Out) Operating Profit is projected between $4.7 billion and $4.9 billion, showing marginal improvement. Investments will focus on digital ecosystems and customer experience enhancements to drive growth.
Management, led by interim CEO Ron Sargent, expresses strong optimism for the next fiscal year. The company aims to further its efforts in competitive pricing, customer engagement, and expanding its digital footprint. These will support achieving its fiscal target and long-term growth objectives, positioning Kroger to capitalize on anticipated market dynamics in 2025.
