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12/03/2020

Kroger raises annual profit forecast; supply chain remains ‘healthy’

Marianne Wilson
Editor-in-Chief
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The Kroger Co. reported a third-quarter profit that blew past Street expectations as it launched more than 250 store-brand items, its most ever for one quarter. 

On its investor conference call, the nation’s largest grocer noted that it has reimposed a purchase limit on certain essential products in recent weeks as demand rises amid a spike in coronavirus cases. But CEO Rodney McMullen told the analysts that Kroger’s supply chain “remains strong and healthy and we are replenishing our stores daily so that the supplies and products our customers need are readily available.”

“To ensure our customers have access to what they need, we have proactively secured an additional 5,000 truckloads of inventory and increased distribution capacity reserves by 20% within our supply chain to get ahead and avoid potential supply disruptions,” McMullen said.  “Furthermore, we have flexed our national footprint by dynamically shifting volume from constrained facilities and regions to facilities and regions with available capacity to accommodate.”

Kroger’s net income rose to $631 million, or $0.80 a share, for the quarter ended Nov.7, from $263 million, or $0.32 a share, in the year-ago period. Adjusted earnings per share were $0.71, beating analysts’ estimates of $0.6 and up 51% from last year. 

Sales during the quarter climbed 6.3% to $29.7 billion, missing expectations of $29.9 billion. Same-store sales rose 10.9%. 

Digital sales rose 108% as Kroger expanded pickup to 2,213 locations and is providing delivery from 2,468 locations, which covers more than 98% of Kroger households.

Kroger said it has invested nearly $1.3 billion to reward employees and to protect them and customers through dozens of safety measures since the beginning of March. 

“We delivered strong results in the third quarter,” stated McMullen in a release. “Customers are at the center of everything we do and sales remain elevated as we continue to enhance our competitive moats: fresh, our brands, data and personalization, and seamless. We are executing against our strategy even during the pandemic and continue to grow market share.” 

With COVID-19 cases surging nationwide, Kroger anticipates that demand for food-at-home will remain strong in its current (fourth), prompting the company to raise fiscal year guidance expectations. The company expects full-year adjusted earnings per share of $3.30 to $3.35, compared with Street estimates of $3.30, and same-store sales to rise about 14.0%, also better than estimates.