Kroger boosts profit outlook as essentials focus pays off
Reuters
Published Jun 16, 2022 08:13AM ET
Updated Jun 16, 2022 11:35AM ET
By Praveen Paramasivam
(Reuters) -Kroger Co raised its profit expectations for the year on Thursday, the latest retailer to defy the inflation-driven slump gripping Corporate America by focusing on essentials.
Major retailers including Walmart (NYSE:WMT) and Target (NYSE:TGT) have in recent weeks sounded alarm bells over the toll inflation is taking on U.S. shoppers, stoking fears the economy could be heading into recession.
But with people prioritizing spending on groceries and necessities - a shift typical during downturns - dollar stores, Costco Wholesale Corp (NASDAQ:COST) and Kroger (NYSE:KR) have weathered the inflation storm relatively well.
Kroger lifted its 2022 forecast for earnings per share by 10 cents to between $3.85 and $3.95, above market estimates of $3.85, according to Refinitiv data. First-quarter profit of $1.45 per share was also 15 cents more than expectations.
Same-store sales of its private-label brands increased 6.3% in the quarter, as consumers snubbed branded juice and prepared meals for cheaper store-owned counterparts.
"Customers are aggressively starting to buy our (private-label) brands, Chief Executive Rodney McMullen said, adding that more than 90% of customers bought a product from a store-owned brand.
"When the economy is tight, our brands always gain share."
Overall same-store sales excluding fuel increased 4.1%, slightly lagging estimates of 4.2%, due to weak sales of general merchandise such as apparel, home furnishings and toys.
After a 1% decline in gross margins to 21.6%, Kroger said it expects margins to remain under pressure this year as supply chain expenses and discounting offset the benefits from its plan to reduce $1 billion in costs through automation and technology.
The company forecast 2022 same-store sales growth between 2.5% and 3.5%, largely below expectations of 3.2%.
"Overall, the results were fine, but for a stock where many are hiding out in this inflationary environment, we do not believe it was strong enough," Citi analyst Paul Lejuez wrote in a note.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.