Warren Buffett's Portfolio Stock Kroger Pauses Buybacks For Albertsons Merger, Narrows FY24 Outlook

Kroger Company (NYSE: KR ) shares are trading lower in the premarket session on Thursday. The company reported third-quarter adjusted earnings per share of 98 cents, in-line with the street view .

Quarterly sales of $33.634 billion (down 0.9% year-on-year) missed the analyst consensus estimate of $34.204 billion . Identical Sales ex-fuel increased by 2.3%.

The LIFO charge for the quarter was $4 million, compared to  $29 million for the same period last year. The decreased charge was due to lower expected year-over-year inflation.

“While we expect the macroeconomic environment to remain uncertain near-term, the strength of our model gives us confidence in our ability to deliver value for customers and invest in our associates,” said Chairman and CEO Rodney McMullen.

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The gross margin for the third quarter was 22.9% of sales. Excluding fuel, the FIFO gross margin increased by 51 basis points from last year, showing Kroger’s ability to improve margins while keeping prices competitive to help customers manage their budgets, the company said.

Kroger closed the sale of its specialty pharmacy business on October 4 for $464 million, reducing total company sales in the third quarter by approximately $340 million.

“We are committed to closing this merger because bringing Kroger and Albertsons together will provide meaningful and measurable benefits – lower prices, secure jobs and expanded access to fresh, affordable food – for customers, associates, and communities across the country,” McMullen adds.

Going forward, the company expects to continue paying its quarterly dividend, which will increase over time, subject to board approval.

Kroger has paused its share repurchase program to prioritize de-leveraging following the proposed merger with Albertsons.

Berkshire Hathaway’s (NYSE: BRK ) latest 13F showed that Warren Buffett’s company had increased their stake in Kroger by 155 to 50 million shares.

Outlook : Kroger has narrowed its FY2024 adjusted EPS guidance from $4.30-$4.50 to $4.35-$4.45, compared to the $4.44 estimate.

The company also expects identical sales growth, excluding fuel, to be between 1.20% and 1.50%.

Kroger’s net total debt to adjusted EBITDA ratio is 1.21 compared to 1.40 a year ago. The company’s net total debt to adjusted EBITDA ratio target range is 2.30 to 2.50.

Kroger stock was down as much as 3.50% in the premarket session but has recovered most of its losses.

Price Action: KR shares are trading lower by 0.35% to $59.70 premarket at last check Thursday.