As Americans continue to cook at home, Kroger stock rises, boosting sales

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More Americans may have returned to offices, classrooms and restaurants, but Kroger CEO Rodney McMullen said that sales in recent months prove that some stay-at-home trends are continuing.

“A lot of customers have learned how to cook and they really like it,” he said on CNBC’s “Closing Bell” show on Thursday. “What they tell us is that they like to eat healthily, and they feel that cooking at home can eat healthier. They also like to show off their new skills.”

Kroger shares rose on Thursday, closing up 11% to $44.65. The grocery store raised its outlook after reporting stronger-than-expected sales growth. With the stock’s latest rise, the country’s largest supermarket operator is expected to achieve its best annual performance since 2014. Its stock price has risen 41% so far this year, and its market value has reached 33.38 billion U.S. dollars.

Kroger’s third-quarter results surprised some investors and indicated that consumers may continue to fill up their refrigerators. The company said that in the third fiscal quarter ended November 6, earnings per share excluding items were 78 cents, and revenue was $31.86 billion. According to data from Refinitiv, analysts on average expect Kroger’s earnings per share to be 66 cents and revenue of $31.23 billion.

During this period, same-store sales excluding fuel increased by 3.1% and 14% in two years. According to StreetAccount, this is higher than the expected 0.9% growth.

Holiday advance

In the fourth quarter, McMullen expects that larger holiday parties and parties will mean people will also buy more groceries.

Kroger is one of the grocery stores that experienced dramatic growth during the pandemic because Americans are basically trapped at home and have to cook more meals by themselves​​. However, as more and more people are vaccinated against Covid-19, analysts are largely betting that habits will be reversed and people will eagerly return to eating out—or even just eating in the company cafeteria.

However, the background continues to evolve and shakes investor expectations. For example, this week, the variant of omicron has injected new uncertainty into how Americans will spend money and whether they are willing to travel.

Ken Goldman, a retail analyst at JPMorgan Chase, said Kroger’s performance was impressive, especially considering how people’s daily lives have changed since a year ago.

“If we surveyed investors three or six months ago and asked if they thought it was possible [Kroger] To release such results by the end of 2021, when consumers return to schools and offices, we think few people will answer yes,” he said in a research report on Thursday.

Inflation may be headwind

Kroger also expressed optimism about the outlook for the rest of the year. The company said it expects same-store sales to be almost flat compared with the previous fiscal year, excluding fuel, which is expected to fall by 0.2% to 0.4%. Looking back on two years and taking into account the surge in sales during the pandemic, its same-store sales are expected to increase by 13.7% to 13.9%.

The company had previously predicted that compared with two years, same-store sales would fall by 1% to 1.5%, or increase by 12.6% to 13.1%.

Kroger said that adjusted earnings per share are expected to be US$3.40 to US$3.50, higher than the previous forecast of US$3.25 to US$3.35 per share.

However, according to Edward Kelly, a retail analyst at Wells Fargo Securities, Kroger will face challenges next year. He said that part of the increase in Kroger’s sales came from price increases.

In a research report on Thursday, he said that the strong grocery trend should continue in the next quarter, but as people’s lives return to normal, once the supply chain challenges ease, inflation prices will subside. This trend It may dissipate in 2022. In addition, he said, Kroger will compare it with an epidemic that is difficult to match.

——CNBC Christopher Hayes Contributed to this report.


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