The Kroger Co. (KR Quick QuoteKR - Free Report) reported first-quarter fiscal 2023 results, wherein the top line missed the Zacks Consensus Estimate but the bottom line beat the same. Notably, both metrics improved year over year. The company also registered growth in identical sales without fuel. Better execution and sustained demand for food resulted in a strong quarter.

This Cincinnati, OH-based company has been making investments to enhance product freshness and quality and expand digital capabilities. Impressively, Kroger remains focused on introducing new items under its “Our Brands” portfolio.

Let’s Delve Deeper

Kroger posted adjusted earnings of $1.51 per share, which surpassed the Zacks Consensus Estimate of $1.43 and increased from $1.45 reported in the prior-year quarter.

Total sales of $45,165 million missed the Zacks Consensus Estimate of $45,423 million. The metric rose from $44,600 million reported in the year-ago period. Excluding fuel, sales increased 3.5% from the year-ago period. We note that identical sales, without fuel, jumped 3.5%. Our Brands’ sales rose 4.9%, while digital sales grew 15%.

We note that the gross margin was 22.3% of sales. The FIFO gross margin rate, excluding fuel, increased 21 basis points (bps) compared with the same period last year. Adjusted FIFO operating profit came in at $1,669 million, up from $1,601 million reported in the year-ago period.

Other Financial Aspects

Kroger ended the quarter with $241 million in cash, total debt of $13,433 million and shareowners’ equity of $10,880 million. Net total debt decreased by $1,460 million over the last four quarters. Management estimates capital expenditures in the band of $3.4-$3.6 billion and expects to generate adjusted free cash flow between $2.5 billion and $2.7 billion in fiscal 2023.

2023 View

The company reaffirmed its financial outlook for fiscal 2023. Management envisions identical sales, without fuel, up 1% to 2% in fiscal 2023, with underlying growth of 2.5% to 3.5% after adjusting for the effect of Express Scripts. The company anticipates adjusted FIFO operating profit in the band of $5-$5.2 billion compared with $5.1 billion reported in fiscal 2022.

Kroger anticipates fiscal 2023 adjusted earnings between $4.45 and $4.60 per share, suggesting an increase from adjusted earnings of $4.23 reported in fiscal 2022.

Shares of this Zacks Rank #2 (Buy) company have fallen 2.1% in the past three months against the industry’s 10.9% increase.

3 Red-Hot Stocks

Some other top-ranked stocks are Tecnoglass (TGLS Quick QuoteTGLS - Free Report) , Skechers U.S.A., Inc. (SKX Quick QuoteSKX - Free Report) and Nomad Foods Limited (NOMD Quick QuoteNOMD - Free Report) , each of which sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Tecnoglass manufactures and sells architectural glass and aluminum products for the residential and commercial construction industries.

The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and earnings per share suggests growth of 18.1% and 23.8%, respectively, from the corresponding year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 22.7%, on average.

Skechers is a worldwide producer and distributor of footwear for men, women and children.

The Zacks Consensus Estimate for Skechers’ current financial-year sales suggests growth of 7.8%, while earnings per share are expected to rise 31.9% from the corresponding year-ago reported figures. SKX has a trailing four-quarter earnings surprise of 18.8%, on average.

Nomad Foods manufactures and distributes frozen foods. The company has a trailing four-quarter earnings surprise of 8.5%, on average.

The Zacks Consensus Estimate for NOMD’s current financial year sales suggests growth of 8%, while earnings are likely to decline 3.4% from the prior-year reported numbers.