Customers shop in the product section of a Kroger market in Versailles, Kentucky, USA, on Tuesday, November 24, 2020.
Scotty Perry | Bloomberg | Getty Images
Kroger said Friday that shoppers filled large grocery baskets during the second fiscal quarter. They bought larger items, such as 24 packs of toilet paper. And they refilled refrigerators often as they cooked more meals at home.
Sales at the company’s same store, a key industry metric, fell 0.6% in the three-month period, almost equaling the increased level of grocery sales over the previous year. He increased his outlook for the rest of the year.
However, shares of Kroger, the country’s largest supermarket operator, fell about 7% on Friday as investors worried about a less favorable trend: declining profits and declining profits. margins.
CEO Rodney McMullen said in a earnings call that “home food trends remain sticky.” He said sales grew year after year in the produce, floral, charcuterie and bakery departments, although he faced challenging comparisons.
But the company is under pressure from higher supply chain costs, rising theft levels and rising food prices, according to Kroger Chief Financial Officer Gary Millerchip. He said the supermarket should pay more for transport and warehouse space. He said it will continue during the second half of the year.
In addition, the supermarket faces inflation. Like other retailers, Kroger has had to debate when to raise customer prices and when to eat up the cost.
Millerchip said the supermarket has selectively discounted products to attract shoppers.
In a research note, JP Morgan analyst Ken Goldman questioned this approach. He said Kroger should pass on more of these costs to buyers, who have become accustomed to seeing higher prices everywhere and have shown it doesn’t scare them.
Also, Goldman said, the price of Kroger shares may be due to a sale. It has already risen significantly during the pandemic and hit a record $ 47.99 last week. Shares have risen about 34% this year.
McMullen said inflation has had at least a silver lining for the retailer: as buyers see the price of some consumer-packaged products rise, some buy snacks, food or similar drinks from private labels. Kroger.
Kroger expects to earn between $ 3.25 and $ 3.35 per share, after adjustments, during fiscal 2021, compared to a previous forecast of $ 2.95 to $ 3.10 per share. In the last quarter, Kroger earned $ 467 million, or 61 cents a share, with revenue of $ 31.68 million. Adjusted earnings of 80 cents per share exceeded estimates.