Sept 12 (Askume) – Kroger (KR.N) raised the bottom line of its annual sales forecast after reporting quarterly results on Thursday, as its efforts to offer fresh food at lower prices appeal to customers looking to save money.
Kroger shares rose nearly 4% as its massive $25 billion deal with smaller rival Albertsons Cos (ACI.N) remains subject to antitrust scrutiny.
American consumers’ household budgets remain tight, leaving little room for splurging even on food, forcing them to shop for the best prices in the market since they often eat at home.
Chief Executive Rodney McMullen said on a post-earnings conference call: “Conscious customers will shop more at the beginning of the month to stock up on their groceries. Then as the month goes on, they’re more interested in spending. They’re becoming more cautious.”
Kroger is looking to attract bargain-seeking shoppers and compete with larger rival Walmart Inc (WMT.N)is also offering promotions to retain , which also raised its annual forecast as demand for cheap staples remains strong .
“Regardless of their income range, consumers … are trying to save some money,” said Joseph Feldman, an analyst at Telsey Consulting Group.
Since late August, the FTC, along with several states, has been pursuing cases to stop the Kroger-Albertsons deal , saying it would raise prices and reduce bargaining power for union grocery workers.
McMullen said, “As the FTC’s preliminary injunction hearing concludes, we remain confident in the facts and our position. The food industry has always been competitive and will remain so after this merger.”
The company plans to reduce grocery prices by $1 billion following the merger .
Its same-quarter sales (excluding fuel) rose 1.2% in the second quarter, while LSEG’s average estimate was for a 0.93% rise.
Excluding items, Kroger reported an adjusted profit of 93 cents per share, beating estimates of 91 cents per share.
Like-for-like sales excluding fuel are now expected to grow by 0.75% to 1.75% in FY24, compared with the previous forecast of 0.25% to 1.75%.
“The business is clearly not struggling under the weight of competition and value investing, as some investors had feared,” said J.P. Morgan analyst Ken Goldman.
