Kroger's is your one-stop-shop for essentials

Shares of grocery chain operator The Kroger Company (NYSE: KR) are trading up 4.5% in 2022, far outperforming tech stocks and benchmarks. The company operates about 2,800 grocery stores and pharmacies under two dozen banners in all 35 states and also sells fuel in more than 1,600 centers. Grocery is what saved big-box stores like Target (NYSE:TGT) and Walmart (NYSE:WMT) and especially warehouse giant Costco (NASDAQ:COST). High inflation has dampened consumer discretionary spending on consumer staples, as indicated by earnings from Dollar General (NYSE:DG). While they don't have many discretionary items, the pure play in consumer staples is Kroger's. They specialize in the two most essential consumer items, groceries and pharmacy. It's like owning Target without the apparel and electronics and CVS (NYSE: CVS) without the markup to reduce prices. They also have a thriving private label business, Our Brands, which allows them to increase margins and accelerate sales growth. Kroger also owns a ton of real estate. Its shares trade at 11.5X forward earnings and sports a dividend yield of 2.17%, ideal for value-oriented investors.

MarketBeat.com - MarketBeat

Steady Eddie wins the race

On September 21, 2022, Kroger released its fiscal second quarter 2022 results for the quarter ending July 2022. The company reported earnings of $0.90 per share, beating analyst consensus estimates of 0. $83 per share of $0.07. Revenue rose 9.3% year-over-year (YoY) to $34.64 billion, beating analyst consensus estimates of $34.44 billion. Identical sales excluding fuel increased by 5.8%. Digital sales increased by 8% and identical sales of Our Brands increased by 10.2%. The company increased its dividend for the 16th consecutive quarter in addition to repurchasing $309 million of stock during the quarter.

Staples are more than stable

Kroger CEO Rodney McMullen said, "Kroger delivered strong second quarter results, powered by our Leading with Fresh and Accelerating with Digital strategy. We are extremely grateful to our dedicated associates who continue to deliver a comprehensive, fresh and friendly customer experience. Our consistent performance underscores the resilience and flexibility of our business model, which allows Kroger to thrive in many different operating environments. We apply technology and innovation to improve freshness , grow our brands and create a seamless shopping experience so our customers can get what they want, when and how they want it, without compromising on quality, selection and affordability."

> Conservative orientation

Kroger has issued some cautious advice on the security side. The company reported its full-year 2022 EPS of between $3.90 and $4.05 compared to consensus analyst estimates of $3.96. Kroger's expects full-year identical sales to grow 4% to 4.5%.

Private label is the engine of growth

Kroger's has evolved its own brands beyond just cheaper counterfeits. Customers actually prefer their culinary foods and natural/organic brands to national brands. Its private labels grew 10.2% year-over-year, nearly double the pace of general identical grocery sales of 5.8%. They sell over 10,000 products under its private brands, including Simple Truth, Private Selection, BL...