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Kroger Lifts Outlook as Sales Rise
Kroger Lifts Outlook as Sales Rise

Globe and Mail

time6 hours ago

  • Business
  • Globe and Mail

Kroger Lifts Outlook as Sales Rise

Kroger (NYSE:KR) reported results for the first quarter of fiscal 2025 on June 19, 2025, delivering identical sales growth excluding fuel of 3.2% and adjusted EPS of $1.49, up 4%. Management announced accelerated store network optimization, a heightened focus on core operations, and raised fiscal 2025 guidance for identical sales excluding fuel to 2.25%-3.25%. Decisive Store Network Optimization Aligned with Core Focus Planned closures of approximately 60 underperforming stores over the next 18 months follow a pause on annual real estate reviews that occurred during the failed merger process with Albertsons Companies. These closures coincide with the completion of 30 major store projects this fiscal year and an anticipated acceleration in new store openings beginning in fiscal 2026, targeting high-growth geographies and increasing total square footage. "To position our company for future success, this morning, we announced plans to close approximately 60 stores over the next eighteen months. We don't take these decisions lightly, but this will make the company more efficient, and Kroger will offer roles in other stores to all associates currently employed at affected stores." — Ron Sargent, Chairman and Chief Executive Officer This proactive footprint rationalization and simultaneous reinvestment strategy should structurally boost average store productivity metrics. The company is also reallocating capital toward markets and formats with superior long-term return on investment (ROI) potential. E-Commerce Acceleration with Profitability Is Still Elusive First-quarter e-commerce sales advanced 15% year over year, supported by unified leadership under Chief Digital Officer Yael Cosset and operational improvements such as reduced pickup wait times. However, management confirmed the e-commerce segment remains unprofitable, despite this being the "best profit improvement yet" on a sequential basis. "We are seeing improvements in profitability at an increasing rate. But to be clear on the profitability, we're not profitable at this point. And we must become profitable in our e-commerce business, and we've got a lot of work to do." — Ron Sargent, Chairman and Chief Executive Officer Robust digital revenue growth drove market share gains and increased household engagement. However, the persistent lack of profitability in e-commerce remains a key execution risk that may require further optimization or strategic partnerships to unlock sustainable returns. Gross Margin Expansion Amid Price Investments and Mix Shifts FIFO gross margin rate, excluding fuel and adjustment items, climbed by 79 basis points, or 33 basis points adjusting for the divestiture of Kroger Specialty Pharmacy, helped by lower shrink and supply chain costs, but partially offset by mix headwinds from lower-margin pharmacy sales. In Q1, management implemented price reductions on more than 2,000 additional items and increased the Our Brands mix, while promoting margin neutrality. "I think the positive news is that these pricing investments resulted in better sales, better gross margin, and happier customers. So I think it would be probably a good example of us continuing to invest in pricing while expanding our gross margin rate." — Ron Sargent, Chairman and Chief Executive Officer This ability to deliver tangible margin expansion -- despite substantial price investments -- highlights operational leverage through product mix, sourcing efficiencies, and private label leadership. These actions occurred in a highly promotional grocery environment. Looking Ahead Management raised full-year guidance for identical sales excluding fuel to 2.25%-3.25% for FY2025, with the second quarter expected to land at the midpoint of this range. Fiscal 2025 guidance for net operating profit and adjusted EPS remains unchanged, reflecting ongoing caution regarding macroeconomic uncertainty and continued fuel headwinds. Completion of the $5 billion accelerated share repurchase (ASR) program is targeted for the third quarter of fiscal 2025, with resumption of open market buybacks under the remaining $2.5 billion authorization planned through the end of the fiscal year. Where to invest $1,000 right now When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor's total average return is 995%* — a market-crushing outperformance compared to 172% for the S&P 500. They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor. See the stocks » *Stock Advisor returns as of June 9, 2025

Rising Costs Ahead: Can Abercrombie Hold the Line on Margins?
Rising Costs Ahead: Can Abercrombie Hold the Line on Margins?

Globe and Mail

time6 hours ago

  • Business
  • Globe and Mail

Rising Costs Ahead: Can Abercrombie Hold the Line on Margins?

Abercrombie & Fitch Inc. ANF entered the first quarter of fiscal 2025 with strong sales momentum but with a strain on gross margins. Despite posting record net sales of $1.1 billion, up 8% year over year, the company saw its gross margin decline 440 basis points (bps). This deterioration was primarily due to elevated freight expenses and markdowns from carryover winter inventory within the Abercrombie brand. These factors forced ANF to lean more heavily on its operating leverage and efficiency gains to deliver an operating margin of 9.3%, down from 12.7% a year ago. The tariff environment added further weight to the company's profitability. ANF now assumes a 10% tariff on all global U.S. imports and a 30% tariff specifically on Chinese imports, resulting in an estimated $50 million margin headwind for fiscal 2025 despite mitigation efforts. While the company is not planning broad-based price increases, it continues to adjust its sourcing footprint and negotiate with vendors to preserve margins. Still, these adjustments will take time, and until then, the company's gross margin remains vulnerable. On the bright side, ANF's Hollister brand continues to outperform expectations, reporting a stellar 22% net sales growth driven by strong category performance and cultural alignment with its core teen customer. The strength of Hollister helped offset some of the weakness seen in Abercrombie brands, which faced a 4% decline in net sales due to promotional pressure and a tough comparison against last year's launch of the Wedding Shop. The company's agile operating model and ability to chase demand helped minimize inventory risk and position it for an expected rebound in the second half. Looking forward, management expects sequential improvement in gross margin as freight-related cost pressures ease and carryover inventory is worked through. While the road to margin normalization is challenged by factors like tariffs, ANF's strong brand equity, flexible supply chain and disciplined inventory management could enable it to weather the storm. However, with limited room to maneuver on pricing, any further cost escalation may pressure the company's ability to sustain recent profit growth. How ANF's Peers Navigate Rising Costs Like Abercrombie, American Eagle Outfitters AEO and Gap Inc. GAP are managing the pressures of elevated input and operational costs through agile supply chain strategies and margin-protection initiatives. AEO is taking a disciplined approach to inventory and cost management, much like ANF. The company has tightened its inventory buys and continues to reduce reliance on promotions by focusing on trend-right assortments and faster product cycles. To mitigate rising freight and sourcing costs, AEO is shifting more of its supply base closer to home and investing in logistics efficiency. AEO's ability to flex inventory levels and chase demand in-season mirrors Abercrombie's 'Read & React' playbook, enabling it to maintain healthy sell-throughs while minimizing markdown exposure. Gap, facing similar cost inflation challenges, is emphasizing supply-chain transformation and product margin enhancement. It has diversified its vendor base, accelerated nearshoring and focused on SKU rationalization to improve forecasting accuracy and lower logistics costs. Gap has prioritized full-price selling and cleaner inventories, particularly in brands like Banana Republic. In addition, the company is leveraging scale and technology to find cost efficiencies, aiming to rebuild margins without significantly raising prices. ANF's Price Performance, Valuation & Estimates Shares of Abercrombie have lost around 4.5% in the past three months against the industry's growth of 7.6%. From a valuation standpoint, ANF trades at a forward price-to-earnings ratio of 7.32X, significantly below the industry's average of 17.32X. The Zacks Consensus Estimate for ANF's 2025 earnings implies a year-over-year decline of 4.9%, whereas its 2026 earnings estimate implies year-over-year growth of 3.9%. The estimates for 2025 and 2026 have been southbound in the past seven days. ANF stock currently carries a Zacks Rank #4 (Sell). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Zacks Names #1 Semiconductor Stock It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom. With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028. See This Stock Now for Free >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Abercrombie & Fitch Company (ANF): Free Stock Analysis Report American Eagle Outfitters, Inc. (AEO): Free Stock Analysis Report The Gap, Inc. (GAP): Free Stock Analysis Report

Rare Bullish Inflow Signals Cause IMAX to Nearly Double
Rare Bullish Inflow Signals Cause IMAX to Nearly Double

Yahoo

timea day ago

  • Business
  • Yahoo

Rare Bullish Inflow Signals Cause IMAX to Nearly Double

IMAX focuses on entertainment technology, specifically motion picture technologies and presentations. The company's immersive theater experience is catching on as it forged 101 new agreements in the first quarter of fiscal 2025 and installed 21 new systems, marking a 40% growth rate. Financially, IMAX's first-quarter fiscal 2025 report showed its best first quarter ever with nearly $300 million in global revenue and over 100 new system agreements. The company boosted its gross margin by 61% and generated per-share earnings of $0.13. Also, IMAX has $400 million available for future growth. No wonder IMAX shares are up 14% this year – and they could rise more. MoneyFlows data shows how Big Money investors are again betting heavily on the stock. Institutional volumes reveal plenty. In the last year, IMAX has enjoyed strong investor demand, which we believe to be institutional support. Each green bar signals unusually large volumes in IMAX shares. They reflect our proprietary inflow signal, pushing the stock higher: Plenty of technology names are under accumulation right now. But there's a powerful fundamental story happening with IMAX. Institutional support and a healthy fundamental backdrop make this company worth investigating. As you can see, IMAX has had strong sales growth and profits: 3-year sales growth rate (+12.2%) Profit margin (+7.4%) Source: FactSet Also, EPS is estimated to ramp higher this year by +19.3%. Now it makes sense why the stock has been generating Big Money interest. IMAX has a track record of strong financial performance. Marrying great fundamentals with MoneyFlows software has found some big winning stocks over the long term. IMAX has been a top-rated stock at MoneyFlows. That means the stock has unusual buy pressure and growing fundamentals. We have a ranking process that showcases stocks like this on a weekly basis. It's made the rare Outlier 20 report multiple times in a year. The blue bars below show when IMAX was a top pick…boosted by Big Money: Tracking unusual volumes reveals the power of money flows. This is a trait that most outlier stocks exhibit…the best of the best. Big Money demand drives stocks upward. The IMAX action isn't new at all. Big Money buying in the shares is signaling to take notice. Given the historical gains in share price and strong fundamentals, this stock could be worth a spot in a diversified portfolio. Disclosure: the author owns IMAX in personal and managed accounts at the time of publication. If you are a Registered Investment Advisor (RIA) or are a serious investor, take your investing to the next level and follow our free weekly MoneyFlows insights. This article was originally posted on FX Empire Bulgaria on Track to Adopt the Euro, Supporting the Economic Outlook Royal Caribbean Seeing Inflows Should You Invest in European Stocks Now? Core & Main Flashes Bullish Outlier Signals Outlier Inflows Boosting Carpenter Technology Rare Outflow Signals Hit Eli Lilly Shares Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

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