Here's our initial take on Kroger's (KR 9.65%) fiscal 2025 first-quarter financial report.

Key Metrics

Metric Q1 2024 Q1 2025 Change vs. Expectations
Revenue $45.27 billion $45.12 billion 0% Missed
Earnings per share (adjusted) $1.43 $1.49 4.2% Beat
Gross margin 22% 23% 100 bps n/a
Debt-to-Adj. EBITDA ratio 1.25 1.69 35% n/a

Strong Earnings, but Uncertainty Remains

In the first quarter, Kroger reported solid earnings, although revenue fell short of expectations. The grocery giant reported $1.49 in earnings per share, three cents ahead of analysts' consensus, but sales came in just modestly short of estimates (although same-store sales excluding fuel purchases grew by 3.2% year over year).

E-commerce sales were a particularly bright spot, up 15% year over year and becoming more of a part of the company's business. It will be very interesting to keep an eye on this metric going forward.

Speaking of going forward, Kroger reaffirmed most of its guidance, including its expectation for full-year EPS in the range of $4.60 to $4.80. Analysts expected to see $4.76, so at the midpoint, management's guidance range is a little weak, especially considering that Kroger beat earnings estimates in the first quarter. On the other hand, Kroger raised its same-store sales guidance (which it refers to as "identical sales without fuel"), so it's fair to say that guidance is a mixed bag.

Management also provided some key updates on Kroger's capital allocation strategy, specifically saying that it expects to not only maintain, but increase its dividend over time. The company also addressed its $5 billion accelerated share repurchase program, which started in the fourth quarter of last year, stating that it expects it to be complete "no later than" the third quarter.

Immediate Market Reaction

The initial market reaction to Kroger's earnings report was rather neutral. As of 8:15 a.m. EDT, about 15 minutes after the announcement, Kroger stock was up by less than 0.5%. This isn't too surprising, considering the mixed results with revenue, earnings, and forward-looking guidance.

However, it's worth noting that this reaction was before management's quarterly earnings call, which was scheduled for later on the same morning. Depending on the comments made, the stock could definitely react one way or another.

What to Watch

In CFO David Kennerley's comments, he specifically called out the uncertain macroeconomic environment as the reason why Kroger didn't raise its guidance for earnings, free cash flow, and other key metrics even though it beat expectations in the first quarter. Tariffs are a key factor to keep an eye on (Kroger sells a lot of products not made here), but it's generally important to realize that there's a lot that is outside of the company's control that can result in better- or worse-than-expected earnings as 2025 goes on.

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