Kroger Co has raised its annual sales and earnings forecasts as inflation-hit consumers drive demand for groceries and household essentials at the expense of discretionary goods.
Grocery stores tend to perform well in an economic turmoil as cash-strapped consumers prioritize food and other necessities, while Kroger also benefits from demand for cheaper in-house items such as cheese and meat.
“We saw incredible engagement with our (private label) brands during the quarter with identical sales growth of 10.2% year-over-year,” said Kroger CEO Rodney McMullen.
The supermarkets of bigger rivals Walmart Inc and Target Corp have also seen a sales increase in recent months.
However, the increased reliance of the major retail chains on clothing and other leisure products that have fallen out of favor has led to inflated inventories, increased discounts and a decline in profits.
Quarterly Performance
Grocery-focused Kroger reported a 56.5% increase in attributable profit to $731 million in the second quarter. Excluding one-time costs, it earned 90 cents a share, better than estimates of 83 cents a share.
Profit margins at Kroger, which has gas stations at many of its stores, were also likely helped by a rise in fuel prices, said BMO Capital Markets analyst Kelly Bania.
Kroger forecast adjusted same-store revenue growth of 4% to 4.5% for fiscal year 2022, compared to its earlier forecast of an increase of 2.5% to 3.5%.
The US supermarket chain forecast annual earnings per share between $3.95 and $4.05, compared to its previous forecast of $3.85 to $3.95.
Same-store sales, excluding fuel, rose 5.8% in the second quarter, compared to estimates of a 4.6% increase, according to IBES data from Refinitiv.
News by Reuters, edited by ESM- your source for the latest retail news. Click subscribe to sign up for ESM: European Supermarket Magazine.
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