Kroger boosts full-year sales forecast as people continue to eat in

Coronavirus, corporate earnings, supermarkets

Kroger’s stock price rose on news of strong sales at the grocery store chain. SOPA Images/LightRocket via Getty Images

Kroger raised full-year sales and profit forecasts after its results topped estimates on Thursday, as a sustained boom in at-home cooking lifts demand for the retailer’s groceries, sending its shares up 12%.

A rise in US COVID-19 cases during the third quarter also boosted sales at grocers, with some such as Costco forced to reinstate limits on purchases of items including tissues, roll towels and bottled water, as consumers resumed hoarding some goods.

“We believe the food at home change is structural and not temporary, with most people consuming meals at home and grocery stores continuing to capture the majority share of stomach,” Kroger Chief Executive Officer Rodney McMullen said in an analyst call.

Concerns over the new Omicron variant of the coronavirus could also potentially boost sales at Kroger in the coming weeks if consumers return to pantry stocking, CFRA analyst Arun Sundaram said.

“If there are more restrictions at restaurants or service outlets, it would result in more consumers eating at home, and Kroger, being the largest conventional food retailer in the U.S., is well positioned to benefit from that.”

Coronavirus, corporate earnings, supermarkets

Kroger said it is keeping tabs on the new Omicron variant of COVID-19 but is advising Kroger shoppers not to feel pressure to hoard groceries and to only buy what they need.

Getty Images

A Kroger spokesperson told Reuters the company was closely monitoring the situation around the Omicron variant and was encouraging shoppers “to only buy what they need.”

Kroger said it expects full-year adjusted earnings per share of $3.40 to $3.50, compared with its prior forecast of $3.25 to $3.35.

The higher forecast comes against the backdrop of a 41-basis-point decline in the company’s third-quarter adjusted gross margin rate as Kroger spent heavily on increasing shipping capacity to mitigate supply-chain disruptions and also due to cost inflation.

Coronavirus, corporate earnings, supermarkets

Some grocers, like Costco, have reimposed limits on buying items like toilet tissue as a rise in COVID-19 cases has led to a boost in sales at supermarkets overall.

Anadolu Agency via Getty Images

The company expects annual same-store sales to dip 0.2% to 0.4%, compared to a fall of 1% to 1.5% it forecast previously.

Kroger’s sales rose 7.2% to $31.86 billion in the third quarter.

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