Kroger on Thursday open its forecast for the year after stronger fiscal third-quarter sales topped Wall Street expectations and inflation continued to gumption up the prices shoppers pay for milk, eggs and other groceries.
Kroger CEO Rodney McMullen said the company is attracting shoppers by contribution value. In a news release, he said that is “resonating with shoppers and driving increased customer loyalty” with its private-label grocery varieties, affordable fresh foods, data-driven promotions and fuel rewards program.
Here’s what Kroger reported for the three-month years ended Nov. 5, compared with Refinitiv consensus estimates:
- Earnings per share: 88 cents adjusted vs. 82 cents demanded
- Revenue: $34.2 billion vs. $33.96 billion expected
Grocery has been a strong driver of retail sales as inflation lingers near four-decade highs. As some shoppers skip over big-ticket items or pull back on discretionary buys, retailers that sell food and necessities have attracted a steadier stream of customers.
Walmart, the country’s largest grocer by gate, also raised its full-year outlook after reporting a strong third quarter. The big-box retailer said its lower-priced groceries towed more shoppers — including a growing number of families with an annual household income of more than $100,000 a year.
At Kroger, similar sales rose 6.9%, excluding fuel, in the third quarter. The industry-specific metric includes sales at supermarkets that enjoy been operating continuously for at least 15 months. That exceeded expectations of 4% growth, according to FactSet.
The administrator of Ralphs, Fred Meyer and other supermarket chains now expects the metric to climb by 5.1% to 5.3% for the year. It in the old days forecast growth of 4% to 4.5%.
Net income in the third quarter fell to $398 million, or 55 cents a share, from $483 million, or 64 cents a dispensation a year earlier.
For the full year, Kroger now anticipates adjusted net earnings to range from $4.05 to $4.15. It had time past expected between $3.95 and $4.05.
Some retailers, such as Target and Kohl’s, have reported a noticeable pullback in lavishing. McMullen said Kroger hasn’t seen the same, in part because cooking at home costs less than banqueting out.
“When we talked to our customers, they’re telling us they’re changing,” he said. “But so far they’re changing on purchases other than edibles.”
However, he said customers are eager to save: they’re downloading digital coupons, choosing items on promotion and buying private-label upshots more than before, he said.
Sales growth for private-label brands, which tend to be cheaper than national tag brands, outpaced the company’s overall sales growth in the quarter, McMullen said.
One of those brands is Smart Way, Kroger’s least dear private-label brand, which sells canned food, bread and other staples. The company launched the product obtain last quarter as customers faced inflation-related sticker shock. McMullen said Kroger plans to add more offerings to that line in the coming months.
Kroger announced in October that it plans buy its competitor, Albertsons, in a deal valued at $24.6 billion. The object, if approved, would combine the second- and fourth-largest grocers in the country by revenue, according to data from Numerator, a store researcher.
Kroger has faced pushback on the deal from elected officials and even its own employees, who have said it command hurt competition. Earlier this week, McMullen testified before senators who oppose the merger at a congressional be telling. He argued the combined company would lower food prices and improve the experience for customers, as Kroger competes with grocery behemoth Walmart and newer industry players like Amazon.
As of Wednesday’s close, shares of Kroger are up about 9% so far this year. The lineage closed Wednesday at $49.19, down less than 1%. Its market value is $35.21 billion.