Kroger stock jumps after grocer beats profit and sales forecasts, raises outlook as stay-at-home food trend continues

By Tomi Kilgore

Same-store sales jump 5.8% as CEO says more customers are ‘cooking from scratch and eating out less’

Shares of Kroger Co. jumped to a three-month high on Friday after the grocery chain reported fiscal second-quarter earnings and sales that beat expectations and improved its full-year outlook, citing the continued strength of home food trends.

Net income for the quarter to Aug. 13 was $731 million, or $1.00 per share, compared with $467 million, or 61 cents per share, for the same period a year ago. Excluding one-time items, adjusted earnings per share rose from 80 cents to 90 cents and beat the FactSet consensus of 82 cents.

Sales rose 9.3% to $34.64 billion, above the FactSet consensus of $34.46 billion, helped by higher fuel prices. Excluding fuel, sales increased by 5.2% compared to last year.

Same-store or same-store sales excluding fuel jumped 5.8%, to beat the FactSet consensus of 4.6% growth. Identical sales benefited from a 10.2% growth in “Our Brands” sales and an 8% increase in digital sales.

The (KR) stock rose 6.4% in afternoon trading, putting it on track for the highest close since June 7, and enough to make it the best performer among shares of the SPDR Consumer Staples Select Sector (XLP) 33. Components exchange-traded fund.

“Our second quarter results provide further proof that Kroger has the right go-to-market strategy,” Chief Financial Officer Gary Millerchip said. “Our consistent execution of this strategy is creating momentum in our business which, combined with continued home dining trends, gives us the confidence to raise our full-year guidance.”

For fiscal 2022, the company raised its adjusted EPS guidance range from $3.95 to $4.05, from $3.85 to $3.95, and raised its outlook for store sales growth. comparables from 4.0% to 4.5%, from 2.5% to 3.5%.

MKM Partners analyst Bill Kirk said the results and outlook show Kroger “shining” in a rational food retail environment. He reiterated his neutral rating and fair value estimate of $55 on Kroger shares.

“[W]We believe the combination of fuel rewards and a leading private label program (+10.2%) sets Kroger apart in an environment where people are increasingly looking to: 1) limit miles driven; 2) find savings per gallon; 3) reduce their food expenses,” Kirk wrote in a note to clients.

Kroger Chief Executive Rodney McMullen spoke on the post-earnings conference call with analysts about the company’s customers looking for ways to save money.

“During the quarter, digital coupon engagement reached an all-time high with 750 million digital offers downloaded, totaling nearly $1 billion in savings,” McMullen said, according to a FactSet transcript of the call.

He added that customers choose products like frozen fruits and vegetables, which helps products last longer in their homes.

“Overall, customers are looking to save money and make healthier choices by cooking more meals at home rather than dining out,” McMullen said.

The stock has gained 2.0% over the past three months, while the consumer staples ETF is up 2.4% and the S&P 500 index is up 1.2%.

-Tomi Kilgore

 

(END) Dow Jones Newswire

09-09-22 1351ET

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