Kroger Co. exceeded Wall Street’s earnings estimates and raised its annual forecast, citing strong demand for food prepared at home and a shift toward private-label goods.
Adjusted earnings in the current fiscal year will range as high as $4.05 a share, up from the previous forecast of no more than $3.95, Kroger said in a statement Friday.
Kroger owns the Spokane area Fred Meyer stores.
The profit measure rose to 90 cents a share in the fiscal second quarter, compared with the 82-cent average of analyst estimates compiled by Bloomberg.
With inflation forcing U.S. shoppers to pull back from nonessentials, Kroger is benefiting from customers continuing to make meals at home even as Covid-19 restrictions are lifted.
The Cincinnati-based grocer has sought to build on those gains by investing in more fresh food and digital offerings, while expanding its store-label products to appeal to increasingly budget-conscious consumers.
“Our consistent execution of this strategy is building momentum in our business which, combined with sustained food-at-home trends, gives us the confidence to raise our full-year guidance,” Chief Financial Officer Gary Millerchip said in the statement.
The shares climbed 1.8% to $49.22 at 9:59 a.m. in New York. Kroger had advanced 6.8% this year through Thursday, compared with a 5.4% decline in an S&P index of consumer-staples companies.
Kroger’s comparable sales excluding fuel increased 5.8% during the three months ending in mid-August, topping the average analyst estimate of 4.3%.
Gross margin, a broad measure of profitability, was 20.9%, the company said. Analysts had estimated 20.5%.
Total sales rose about 9% to $34.6 billion. Analysts had predicted $34.4 billion. Excluding fuel, the revenue gain was 5.2%, Kroger said.
The company reported a 10% sales gain in its store-label “Our Brands” portfolio, in a sign that more shoppers are trading down to stretch their dollars.
Kroger announced a new “Smart Way” product line this week that will bring together 16 legacy brands and specialize in opening price points for penny-pinching customers.
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