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Home chefs fuel grocer Kroger's forecast raise, profit beat

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FILE PHOTO: The Kroger supermarket chain's headquarters is shown in Cincinnati
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  • KR

By Uday Sampath Kumar

(Reuters) -Kroger Co 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 U.S. COVID-19 cases during the third quarter also boosted sales at grocers, with some such as Costco Wholesale Corp 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."

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.

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.

(Reporting by Uday Sampath and Ananya Mariam Rajesh in Bengaluru; Editing by Vinay Dwivedi)

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