10:57 AM EDT, 06/20/2024 (MT Newswires) -- Kroger ( KR ) posted a surprise fiscal first-quarter revenue increase and stronger-than-expected earnings per share on Thursday while affirming its 2024 outlook despite ongoing profitability pressures in its pharmacy business.

The grocery store operator's revenue edged up to $45.27 billion for the three months ended May 25 from $45.17 billion the year earlier and topped the $45.12 billion the average analyst estimate on Capital IQ.

Identical sales without fuel increased by 0.5%, decelerating from a 3.5% rise in the same quarter of 2023 but surpassing the average analyst estimate of about 0.2%. Shares of Kroger ( KR ) fell 3.4%.

"Kroger ( KR ) is off to a solid start in 2024 led by better-than-expected performance of our grocery business," Chief Executive Rodney McMullen said in a statement. The company is offering value through affordable prices and personalized promotions at a time when many customers "need it more than ever," he said.

Adjusted earnings per share dipped to $1.43 from $1.51 year over year but was ahead of the $1.37 Wall Street view. First-in first-out gross margin excluding fuel slid seven basis points primarily due lower pharmacy margins and increased price investments.

The company affirmed its expectation for full-year identical sales without fuel to climb 0.25% to 1.75% year over year and adjusted EPS in the $4.30 to $4.50 range. The consensus is for identical sales growth excluding fuel of 1% and normalized EPS of $4.43 for the ongoing year.

"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," McMullen said.

For the fiscal second quarter, Kroger ( KR ) expects a decline in adjusted EPS similar to the rate of decline in the first quarter due to ongoing pharmacy business profitability pressures, Chief Financial Officer Todd Foley told analysts on a conference call, according to a Capital IQ transcript. The full-year outlook reflects positive momentum alongside "a more cautious customer environment in the near term," he said.

Price: 49.90, Change: -2.08, Percent Change: -4.01