Kroger Company ( KR ) shares are trading higher after the company reported first-quarter earnings results, recording adjusted FIFO operating profit of $1.499 billion.

Quarterly sales totaled $45.3 billion, compared to $45.2 billion a year ago. Sales beat the street view of $45.04 billion.

Kroger ( KR ) said it grew digital sales by more than 8%, with Delivery and Pickup combining for double-digit growth. For the first quarter, the gross margin was 22.4% of sales. 

The FIFO gross margin rate, excluding fuel, decreased seven basis points year over year, owing to lower pharmacy margins and increased price investments. 

The LIFO charge, an inventory valuation method, for the quarter reduced to $41 million, compared to $99 million in the year-ago period, thanks to lower inflation expectations.

The company reported adjusted earnings per share of $1.43, beating the analyst consensus of $1.34.

Kroger ( KR ) exited the quarter with cash plus temporary cash investments worth $2.8 billion. The company’s long-term debt, including obligations under finance leases, is pegged at $12.02 billion. As of quarter end, its net total debt stood at $9.718 billion.

The company expects to continue to pay its quarterly dividend and expects this to increase over time, subject to board approval.

Kroger ( KR ) has paused its share repurchase program to prioritize de-leveraging following the proposed merger with Albertsons Companies, Inc. ( ACI ) .

“The long-term investments we have made to strengthen and diversify our model enables us to manage economic cycles and gives us the confidence to deliver on our full-year outlook,” said CEO Rodney McMullen.

FY24 Outlook Reiterated: Kroger ( KR ) sees identical sales without fuel 0.25%–1.75%. The company projects adjusted EPS of $4.30-$4.50 for FY24 (consensus $4.43).

The company sees an adjusted free cash flow of $2.5 billion-$2.7 billion, with capital expenditures of $3.4 billion-$3.6 billion.

Price Action: KR shares are trading higher by 3.91% to $54.01 premarket at last check Thursday.

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