Kroger: A Modestly Interesting Grocery Story

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Kroger (KR +4.66%) recently announced its results, and the stock gave a little jump – about 4.8% as I looked. Now, I’ve spent a fair amount of time in supermarkets over the years – a regrettable necessity, really – and it’s always struck me as a profoundly complicated business. Keeping track of all those perishables, the logistics of getting everything onto shelves, and the sheer volume of decisions people make between cornflakes and granola… it’s a wonder anything gets done at all. Anyway, Kroger’s numbers.

Analysts thought they’d earn $1.20 a share. They managed $1.28. Not a vast overshoot, but enough to elicit a polite nod. Sales were a touch under expectations at $34.7 billion. It’s all relative, of course. If you laid all those dollar bills end to end, it would stretch a considerable distance. Probably to the next state.

Kroger Q4 Earnings: A Closer Look

Overall sales crept up a mere 1.2%. Apparently, falling fuel costs had something to do with it. Which is…logical, I suppose. People still need groceries, but if gas is cheaper, they might drive a little further to save a few pennies. Clever devils, these consumers. Stripping out the fuel element – because comparing apples and gasoline is never a good idea – sales increased a more respectable 2.4%. Operating profit soared 36.6%, and earnings per share jumped 50% to $1.35. Numbers like that tend to catch the eye, though it’s always wise to remember that past performance isn’t a guarantee of future results. My grandmother used to say that about everything, and she was usually right.

For the year as a whole, Kroger did $147.6 billion in sales, which is up a negligible 0.3%. Again, the fuel situation. But, excluding fuel, same-store sales increased 2.9%. That’s…something. Full-year profit, however, fell by more than half to $1.54 per share. A bit of a mixed bag, really.

Free cash flow for the year was $3.4 billion, almost double what they generated in 2024. Now, free cash flow is the good stuff. It’s what companies use to pay dividends, buy back shares, or, you know, do interesting things. In Kroger’s case, it suggests they’re reasonably well-managed, which is always reassuring.

Is Kroger Stock a Buy?

On a market capitalization of $47.2 billion, that free cash flow translates to a price-to-free cash flow ratio of 13.9. Not terrible. In fact, it’s rather attractive, especially considering they’ve just doubled their annual free cash flow. The question, of course, is whether they can maintain that turbocharged growth. And, frankly, probably not. These things rarely happen.

Management is forecasting sales growth of perhaps 1% or 2% in 2026. Earnings are expected to bounce back to somewhere between $5.10 and $5.30 per share, which gives the stock a forward P/E ratio of 13.7 – roughly equal to its current P/FCF ratio. It’s all rather…stable.

For the nation’s biggest supermarket chain, paying a 2% dividend yield, that seems a fair price to me. It’s not going to set the world on fire, but it’s a solid, dependable business. And in a world of increasing uncertainty, there’s something to be said for that. It’s not glamorous, but then again, neither is grocery shopping.

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2026-03-05 22:42