Kroger Co (KR) -) shares moved higher Friday after grocery store giant's second quarter earnings and a statement that detailed a $1.3 billion settlement linked to the group's role in the nation's opioid crisis.
Kroger said it agreed to pay $1.2 billion to various U.S. states, as well as $36 million to Native American tribes, for its role in the nation's opioid crisis.
The agreement, which does not include an admission of wrongdoing or liability on the part of Kroger, will result in a $1.4 billion charge to its second quarter earnings, a tally that equates to around $1.54 per share.
On an adjusted basis, however, Kroger topped Street forecasts with a bottom line of 96 cents per share, a 6.6% from last year, on revenues of $33.8 billion, a total that fell shy of analysts' estimates of $34.12 billion as the group continues to lose market share to Walmart (WMT) -) in its push to bring in value-focused shoppers into its food and grocery business.
"By investing in price and providing more personalized offers, we are helping customers stretch their budgets and manage the ongoing effects of reduced government benefits, inflation and higher interest rates," said CEO Rodney McMullen.
"While we expect the environment to remain challenged going forward, we are committed to delivering exceptional value for our customers and investing in our associates, and by doing so, we expect to generate attractive returns for shareholders," he added.
Kroger shares were marked 4% higher in early afternoon trading Friday following the earnings release to change hands at $47.33 each.
Kroger, which is attempting to merge with rival Albertsons Companies ACI in a $24.6 billion that would combine the country's two biggest grocery store chains, will likely address the Walmart challenge, as well as its merger plans, when it speaks to analysts later Friday.
In fact, Kroger confirmed media reports Friday when it reached an agreement to sell 413 stores to C&S Wholesale Grocers for around $2 billion in order to appease concerns levied by the Federal Trade Commission and attorneys general from several U.S. states.
"In relation to the comprehensive store divestiture plan released alongside Kroger’s Q2 2023 earnings this morning, our experts have previously noted that the sale of 400+ stores spread across key geographies should be enough to satisfy regulators," said Third Bridge analyst John Oh.
"However, with continued regulatory scrutiny around the merger with Albertsons, our experts have also highlighted that it may take longer than initially expected," he added.
Kroger has pledged to invest another $1.3 billion towards upgrading Albertsons store —which include brands such ACME, Safeway and Vons— as well as another $1 billion to improve benefits and wages for the group's employees in an effort to offset regulatory and consumer advocacy concerns.
"We are strongly opposed to this merger and urge you to stop this corporate consolidation that is draining Americans of their hard-earned wages and livelihoods," the AGs of seven states, including Colorado, Arizona and Minnesota, wrote to FTC chairman Lina Khan last month.
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