Kroger is hit by higher costs and compensates for bigger grocery baskets

Kroger is hit by higher costs and compensates for bigger grocery baskets

Kroger said on Friday that shoppers were filling larger grocery baskets in the second quarter of the fiscal year. He bought large items like a 24 pack of toilet paper. And they were filling the fridge over and over again because they were cooking more meals at home.

The company’s comparable store sales, a key industry metric, fell 0.6% over the three-month period, roughly in line with the increased level of grocery sales over the course of the three-month period. from the period of last year. He raised his outlook for the rest of the year.

Still, shares of Kroger – the nation’s largest supermarket operator – fell nearly 7% on Friday afternoon as investors worried about a less favorable trend: falling profits and squeezing margins.

CEO Rodney McMullen said on a results conference call that “the home food trend remains persistent.” He said sales in the Produce, Floral, Deli and Bakery departments have increased year on year, despite difficult comparisons.

But according to Gary Millerchip, CFO of Kroger, the company is under pressure from high supply chain costs, increasing levels of piracy and rising food prices. The grocer will have to pay more for transportation and storage space, he added. He said this would continue into the second half of the year.

In addition, the grocer faces inflation. Like other retailers, Kroger has had to debate when to raise prices for customers and when to drop the price.

Millerchip said the grocery store offered discounts on certain products to attract shoppers.

In a research note, JP Morgan analyst Ken Goldman questioned this approach. He said Kroger should pass these higher costs on to buyers who have become accustomed to seeing high prices everywhere and have shown they are not afraid of them.

Additionally, Goldman said, Kroger’s share price could be due to a sell-off. It has already increased significantly during the pandemic, hitting a record high of $ 47.99 last week. The shares have risen about 34 percent this year.

McMullen said inflation has at least one benefit for the retailer: While shoppers see the price of some consumer packaged goods rise, some are purchasing similar private label Kroger snacks, foods or drinks.

Kroger expects after adjustments in fiscal 2021, it will earn $ 3.25 to $ 3.35 per share, compared to an earlier forecast of $ 2.95 to $ 3.10 per share. In the last quarter, Kroger earned $ 467 million, or 61 cents per share, on revenue of $ 31.68 billion. Adjusted earnings of 80 cents per share exceeded estimates.


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