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Kroger shares spike following earnings beat

 

Friday, December 01, 2023

Today’s headlines

What’s happening: Shares of Kroger gained on Thursday, after the company released results for its third quarter.

What happened: The supermarket chain reported better-than-expected earnings for its latest quarter on Thursday.

However, Kroger reduced its full-year outlook for sales growth amid a moderation in grocery and food prices.

How were the results: The Cincinnati, Ohio-based company reported a slight decline in sales for its third quarter.

  • Sales fell 0.7% year-over-year to $33.96 billion, but exceeded the consensus estimates of $33.92 billion.
  • Adjusted earnings came in at 95 cents per share, topping Wall Street expectations of 91 cents per share.

Why it matters: Consumers are still looking for low-priced items, despite inflation easing in the US. Kroger was forced to offer higher deals and discounts, which exerted pressure on its profitability.

Kroger’s operating margins rose from 2.5% to 2.7% in the quarter, while operating income grew by 8.4% to $912 million. Identical sales, excluding fuel, fell by 0.6%. CEO Rodney McMullen said that a strong fuel performance and growth in alternative profit businesses had supported growth in adjusted net earnings.

As of November 4, 2023, Kroger held $1.725 billion in cash and temporary cash investments and had a net total debt of $11.3 billion.

For the full year, the company increased the lower end of its adjusted earnings guidance, now seeing earnings between $4.50 and $4.60 per share. They projected growth in identical sales, excluding fuel, of 0.6% to 1%, down from their earlier outlook of 1% to 2%.

The company said its recent guidance reflects the “impact of near-term economic pressures and food-at-home disinflation.”

How shares responded: Kroger’s shares gained 1.4% to close at $44.27 on Thursday, following the release of quarterly earnings. The stock has lost around 2% over the past month.

What to watch: Investors will continue monitoring overall inflation and consumer spending levels.

The markets today

The Canadian dollar will be in focus today ahead of a basket of major economic reports

Context: The CAD/USD forex pair gained on Thursday, as investors responded to the Canadian GDP release.

Details: The Canadian economy contracted by 1.1% on an annualised basis in the third quarter, compared to market estimates of 0.2% growth.

The recent data fuelled concerns around the Bank of Canada’s aggressive policy tightening was weighing on the economy. This triggered speculations of the central bank beginning to cut interest rates in the first half of next year.

Other data released on Thursday showed average weekly earnings of non-farm payroll employees in Canada rose by 4% year-over-year in September, accelerating from 3.9% in the previous month. CFIB’s Business Barometer in Canada fell by 1.5 points to 45.6 in November, recording the third straight decline in optimism.

Crude oil prices moved lower after the OPEC+ (Organization of the Petroleum Exporting Countries and its allies) announced additional output reductions for the first quarter of 2024.

Weakness in the price of crude oil, one of Canada’s major exports, limited the loonie’s overall gains on Thursday. WTI crude oil futures fell $1.90 to settle at $75.96 a barrel.

The CAD/USD forex pair gained more than 0.2% to 1.3561 on Thursday. The S&P/TSX Composite Index gained 0.60% to close at 20,236.29.

What to watch: Investors await the release of economic reports on the unemployment rate, employment change, average hourly earnings and manufacturing PMI from Canada today. The unemployment rate in the country had risen to 5.7% in October and is projected to increase to 5.8% in November.

The Canadian economy, which added 17,500 jobs in October, is expected to create 20,000 jobs in November. Analysts expect average hourly earnings for permanent employees in Canada to rise by 5% year-over-year in November. The S&P Global manufacturing PMI is projected to decline to 47 in November, from 48.6 in October.

Other Markets: European indices closed higher on Thursday, with the FTSE 100, DAX 40, CAC40 and STOXX Europe 600 Index up by 0.41%, 0.30%, 0.59% and 0.55%, respectively.

The news shaping the markets

The growing speculations of Russian President Vladimir Putin announcing his intention to run for president again in the 2024 elections when he addresses the nation on December 14 sent the safe-haven US dollar index higher this morning.


Australia’s Judo Bank flash manufacturing PMI fell to 47.7 in November, from 48.2 a month ago, exerting pressure on the AUD/USD forex pair.


New Zealand’s ANZ Roy Morgan consumer confidence index climbed to 91.9 points in November, from 88.1 in the earlier month, sending the NZD/USD pair higher in forex trading this morning.


Argentina’s consumer confidence indicator climbed to 47.51 in November. This being the strongest level since November 2017 lent support to the ARS/USD forex pair.


US monthly core PCE inflation slowed to 0.2% in October, from 0.3% in September, which sent the Dow Jones index higher by more than 500 points on Thursday.

What else to watch today

Russia’s manufacturing PMI, Türkiye manufacturing PMI, UK’s Nationwide house price index and manufacturing PMI, France’s manufacturing PMI, new passenger car registrations and government budget value, Spain’s manufacturing PMI and new car sales, Italy’s manufacturing PMI, new passenger car registrations and GDP growth rate, Germany’s manufacturing PMI, Eurozone’s manufacturing PMI, South Africa’s manufacturing PMI and total vehicle sales, Mexico’s foreign exchange reserves, manufacturing PMI, business confidence indicator and government budget value, India’s value of loans, value of deposits and foreign exchange reserves, Brazil’s industrial production, balance of trade and manufacturing PMI, US S&P Global manufacturing PMI, ISM manufacturing PMI, construction spending and Baker Hughes crude oil rigs, Argentina’s tax revenue and interest rate decision, as well as Australia’s CoreLogic Home Value Index.


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