Kroger Co raised full-year sales and profit forecasts, boosted by a sustained demand for groceries as the pandemic-induced boom in at-home cooking persists.
The pandemic-led trend of cooking at home continues even as virus restrictions have eased, keeping sales at grocery chains that benefited during last year's lockdowns elevated.
A rise in US COVID-19 cases during the third quarter also boosted sales at grocers, with some like Costco Wholesale Corp forced to reinstate limits on purchases of items including tissues, roll towels and bottled water, as consumers resumed hoarding goods.
"If we had surveyed investors three or six months ago and asked if they thought it was possible for Kroger to post these kind of results in late 2021, when consumers headed back to schools and offices, we think very few would have responded yes," J.P. Morgan analyst Ken Goldman said.
"All in, this was a very healthy print, as we see it, and the stock deserves to be up."
Kroger third-quarter sales rose 7.2% to $31.86 billion, beating analysts' estimates of $31.23 billion, according to Refinitiv IBES data.
Shipping Capacity
The company has been spending heavily on increasing shipping capacity and ramping up manufacturing at factories that produce its private-label products to overcome global supply-chain disruptions and avoid a shortage of products on its shelves during the holiday season.
Those expenses, along with an increase in wages, led to a 41 basis point decline in the company's adjusted gross margin rate, mirroring results from peers Walmart Inc and Target Corp which have also seen their profit margins squeezed due to higher labour and freight costs.
Kroger said it expects full-year adjusted earnings per share of $3.40 to $3.50, compared with its prior forecast of $3.25 to $3.35.
The company said it expects full-year same-store sales to dip 0.2% to 0.4%, compared with its prior forecast of a fall of 1% to 1.5%.
Excluding one-time items, Kroger earned 78 cents per share in the third quarter, beating estimates of 66 cents per share.
Read More: Kroger Delivery Expands With New Fulfilment Centres
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