Kroger raises lower end of annual sales forecast as cheap groceries lure customers
By Ananya Mariam Rajesh
(Reuters) – Kroger (NYSE:) raised the lower end of its annual sales forecast after topping Wall Street expectations for quarterly results on Thursday, as its efforts to offer freshly sourced groceries at lower prices helped draw customers looking to save money.
Shares of Kroger, whose $25-billion mega deal with smaller rival Albertsons (NYSE:) is under antitrust review, rose 2%.
U.S. consumers still have tight household budgets with little room to splurge, even on food, pushing them to buy items at the best possible price in the market.
Kroger has also offered promotions to attract deal-hunting consumers and keep up with competition from bigger rival Walmart (NYSE:), which also raised annual forecasts as demand for inexpensive essentials remains strong.
Grocers are also benefiting from customers opting to make food at home, rather than spending at fast-food chains such as McDonald’s (NYSE:) and Restaurant Brands-run Burger King.
“The consumer is still very much focused on getting household essentials, food and consumables into their home… Regardless of where the consumer fits in the income spectrum, they are trying to stretch their dollars and save some money,” Telsey Advisory Group analyst Joseph Feldman said.
Since late August, the U.S. Federal Trade Commission, along with several states, went to trial to block the Kroger-Albertsons deal, saying it would raise prices and lead to less bargaining power for unionized grocery workers.
“As we near the close of the FTC’s preliminary injunction hearing, we are confident in the facts and the strength of our position. The food industry has always been competitive and will continue to be after this merger,” Kroger CEO Rodney McMullen said.
The company has already laid out plans to lower grocery prices by $1 billion after the merger.
Its second-quarter identical sales, excluding fuel, rose 1.2%, compared with an average LSEG estimate of 0.93% growth.
Excluding items, Kroger posted an adjusted profit of 93 cents per share, topping an estimate of 91 cents per share.
It now expects fiscal 2024 identical sales, excluding fuel, to grow between 0.75% and 1.75%, compared with its prior forecast of 0.25% to 1.75% growth.
