Kroger stock rises as Americans keep cooking at home, boosting sales
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Although more Americans might have gone back to work, school, and the restaurants, KrogerRodney McMullen, CEO of Rodney McMullen stated that recent sales prove that some trends in stay-at home are still popular.
He said that “an awful lot of our customers learn how to cook, and they really enjoy cooking,” Thursday’s CNBC interview.Closing Bell.” Their message is that they enjoy healthy food and believe they can cook healthier at home. These people also enjoy showing off new skills.
Kroger shares surged Thursday and closed at $44.65. The grocer raised its outlook after reporting stronger-than-expected sales gains. This stock is poised for the best year-to-year performance of any supermarket in the country since 2014. The company’s stock has risen 41% in the past year, making it worth $33.38 billion.
Some investors were surprised by Kroger’s results for the third quarter. It indicated that customers may continue to stock up on groceries. According to the company, it reported a profit of 78c per share (excluding items) on $31.86 billion revenue in its fiscal third quarter ending Nov. 6. According to Refinitiv, Kroger was expected to earn an average of 66 cents per Share on revenues of $31.23 trillion.
The company’s same-store sales increased 3.1% (excluding fuel) and 14% over a 2-year period. According to StreetAccount, this is more than the expected 0.9% growth.
Holiday boost ahead
McMullen predicts that there will be more holiday parties and gatherings in the fourth quarter. This could translate into people buying more groceries.
Kroger is among the grocery stores that experienced rapid growth after the pandemic. Americans were often stuck in their homes and needed to prepare more meals. As more people have gotten Covid-19 vaccinations, however, analysts have largely bet that habits would reverse and people would eagerly return to dining out — or even just eating at the company cafeteria.
Investor expectations have been reshaped and the background has not stopped changing. As an example, take this week. the omicron variantThe uncertainty surrounding how Americans spend their money has caused new concern. if they’re willing to travel.
Ken Goldman is a J.P. Morgan retail analyst. He said that Kroger’s results were impressive considering the changes in people’s lives since last year.
If we had interviewed investors 3 to 6 months before, and asked them if it was feasible for us to do so. [Kroger]He said that he would post the results as soon as possible in 2021 because consumers were returning to work and schools. We think most people wouldn’t have answered yes.”
A headwind could be inflation
The outlook from Kroger for the remainder of this year is also positive. The Kroger stated that it expects sales at the same store to remain flat, with a 0.2%-to 0.4% decline, exempting fuel. If you look back over two years and take into consideration the increase in sales due to the pandemics, your same-store revenues are likely to rise between 13.7%-13.9%.
The company had previously projected that same-store sales would drop between 1% and 1.5% — or increase 12.6% to 13.1%, when compared on a two-year basis.
Kroger reported that adjusted earnings are expected to be in the $3.40-$3.50 range, an increase on its prior forecasts of $3.25-3.35 per share.
According to Edward Kelly (a retail analyst at Wells Fargo Securities), Kroger faces challenges next year. According to Kelly, some of Kroger’s growth is due to inflated prices.
A research note he released on Thursday stated that while strong grocery trends are expected to continue into the fourth quarter, they will most likely slow down in 2022 once life becomes normal and supply chain difficulties ease. He also said that Kroger would be up against difficult-to-match pandemics.
—CNBC’s Christopher HayesThis report was contributed by you.
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