A Kroger grocery store in Savannah, Georgia (Parker Pulse/Bloomberg)
key takeaways:
- Kroger reported on June 18 that same-store sales excluding fuel rose 1%, which exceeded Wall Street expectations as shoppers focused on spending on groceries.
- The gain reflected budget-conscious consumers amid inflation and higher fuel costs, while profits were pressured by transportation spending, price cuts and lower egg prices.
- Kroger plans sweeping price cuts under CEO Greg Foran to compete with Walmart, Costco and Amazon, while maintaining full-year guidance despite margin pressure.
Kroger Co.’s sales during the latest quarter exceeded expectations, showing that U.S. shoppers are prioritizing groceries and other necessities as they keep a close eye on their budgets.
The country’s largest supermarket operator said on June 18 that same-store sales excluding fuel rose 1%. This was slightly better than the 0.96% increase Wall Street analysts were predicting this.
Kroger looks to gain market share under new CEO Greg Foran. After taking the helm in February, Foran told Bloomberg News last month that he plans to implement Kroger’s biggest price cuts in years to be more competitive against rivals such as Walmart Inc., Costco Wholesale Corp. and Amazon.com Inc.
Shares were little changed during premarket trading. Kroger maintained its full-year guidance, although its quarterly profit declined due to higher transportation costs, planned price cuts and lower egg prices.
Years of high prices have led many consumers to turn to cheaper store brands and sale items when shopping for food. Recent increases in gas prices due to the Iran war have further strained the domestic budget, with US inflation rising in May at the fastest pace in more than three years. Within groceries, prices for beef, coffee and some types of produce are rising.
Kroger, whose stores include the Fred Meyer and Ralphs chains, is breaking ground by lowering prices across all product categories and providing friendlier, faster services. Walmart and Costco have also said in recent weeks that they will continue to prioritize value and keep prices competitive as shoppers look for deals.
“We are pleased with our first quarter results, but we know there is more work to do,” Foran said in a statement.
U.S. retail sales rose across a variety of categories last month. Some companies have said that lower-income buyers are becoming more budget-conscious while affluent consumers are continuing to spend.
Kroger is ranked No. 31 on the Transportation Topics Top 100 list of the largest private carriers in North America, and No. 3 on the TT Grocery list. Costco ranked 53rd on the private carrier list.
Amazon is ranked No. 1 on the Transport Topics Top 100 list of the largest logistics companies in North America, No. 15 on the Private Carriers list, and No. 1 on the TT Top 50 list of the largest global freight companies.
