The Kroger Co. reported a strong first quarter well ahead of Street expectations amid increased grocery spending resulting from the COVID crisis.
The supermarket giant reported income of $1.21 billion, or $1.52 per share, for the quarter ended May 23, up from $772 million, or $0.95 per share, last year. Adjusted EPS were $1.22, easily topping analysts’ estimates of $1.12.
Sales rose to $41.55 billion from $37.25 billion last year, beating estimates of $40.71 billion. Comparable sales (excluding fuel) soared 19.1%. Digital sales skyrocketed 92%. New customer engagement with Kroger's pickup and delivery services spiked significantly during the quarter and the company been encouraged by early customer repeat usage, Kroger CFO Gary Millerchip said on the company's earnings call. Kroger now has more than 2,000 pickup locations and 2,400 delivery locations that reach 97% of its customers.
Kroger's digital momentum has continued into its second quarter. Digital sales were up triple digits in the first three weeks of the quarter, according to Millerchip. Same-store sales growth in the quarter to date has been in the mid-teens.
Kroger said it has invested more than $830 million to reward employees, and safeguard employees, customers and communities during the pandemic. Measure include the hiring of more than 100,000 employees and the testing of nearly 83,000 patients for COVID-19 in 15 states as was one of only five U.S. retailers to "develop, staff and expand free COVID testing model in partnership with the federal and state governments."
The retailer said that it expects to exceed its original 2020 outlook for same store sales growth and profit. But it did not not reaffirm or provide new 2020 guidance.
"The COVID-19 pandemic has dramatically changed the outlook for food retail in 2020 and we continue to monitor, evaluate and adjust our plans to address the impact to our business,” the company stated. “There are still many unknown factors related to the long-term impact of COVID-19 that could influence our financial results for the remainder of 2020. We remain confident in our business model as well as our ability to generate strong free cash flow and achieve sustainable and attractive total shareholder returns."