Yesterday, we posted this email from an MNB reader, commenting on kroger’s recent Q1 numbers:
The one thing that stands out for me is the 50% increase in quarterly earnings versus year prior. Marginal sales improvement versus a 50% increase in earnings. It is quite obvious that Kroger is fattening up their cash position to pay for a possible acquisition of Albertsons. The loser with the increased earnings was the consumer because of higher prices at the shelf. Many of my retired cohorts in the food industry and many of our neighbors have left Fred Meyer, Safeway, and Albertsons, and are shopping at Winco and Walmart as their primary retailers for their food purchases.
Another MNB reader chimed in:
This is not a correct interpretation of their 1Q results. The increased net earnings was mostly related to a smaller loss on investments (Ocado), and not related to their operating performance. 1Q adjusted operating profit increased about 4% (before interest, taxes, loss on investments and a few 1x items), see below. If you want to consider the impact of retail pricing, look at gross margin, which did increase 21 bps in 1Q (excluding fuel). This improvement in the gross margin rate “was primarily attributable to Our Brands performance,
sourcing benefits, lower supply chain costs and the effect of our terminated agreement with Express Scripts, partially offset by higher shrink and increased promotional price investments.” Still, the reader’s comment about saving some $ by shopping Winco and Walmart still holds as survey show their prices are historically about 10% below Kroger’s.
Meanwhile, 1Q free cash flow did improve to about $1.8B largely due to reduced working capital investments, including lower inventory and receivables, and higher accounts payable, which helped boost cash levels.
On another subject – great baseball movies, a list on which I included “Bull Durham,” “Field of Dreams,” “The Natural,” “Minor League,” and “Eight Men Out” – MNB reader Jerry Sternberg wrote:
I do agree that every movie mentioned is a wonderful film. However nothing gets my baseball excitement revved up like the old Ray Milland movie of “It Happens Every Spring “. Very kitschy but so much fun.
I’ve never seen “It Happens Every Spring,” to be honest. I may have to find some time for it.
The other day, we had a pair of stories about how changing climate conditions are creating yield problems for US orange and wheat crops. To which one MNB reader responded:
“Anyone seen Beeks?”
I cannot put into words how happy that email made me. Just three little words, but they just made me laugh out loud.
Looking good, Billy Ray. Feeling good, Louis
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