Kroger Boosts Sales, Profit Expectations

The company is projecting identical-store sales excluding fuel to grow between 4.5% and 5%, compared with previous guidance of 4% to 5%, and earnings to hit $1.95 to $2 per share, compared with a previous range of $1.85 to $1.95.

 

David B. Dillon, chairman and chief executive officer, said Kroger's optimistic projections are based on the knowledge it can operate in the current economic environment.

 

"The fact we've been able to grow loyal households and to make ends meet really well suggests we can be successful in this environment," he told analysts during a conference call. "We now know we can work in an environment like this and be successful. So what has changed is that we went from the unknown to the known.

 

"We expect the foreseeable part of next year to be much like what we've seen this year. I don't see it crashing or burning, but I don't see it as robust and climbing either. It all depends on consumer confidence."

 

For the quarter, which ended Nov. 5, net income fell 3.1% o $195.9 million — due to a higher inventory charge in the quarter and a tax benefit a year ago — while sales rose 10.3% to $20.6 billion and identical-store sales, excluding fuel, rose 5%. For the year-to-date, net income was up 8.5% to $909 million, with sales rising 10.9% to $69 billion. The company did not release ID sales for the three quarters combined.

 

Unit count and shopping trips were up, Dillon said, but tonnage was flat. "Smaller baskets are the norm across all customer segments, in line with trends we began detecting in June," he explained.   

 

"We have seen a continued slowing of the rate of growth of unit movement throughout the year, and with the intersection of inflation and a poor economy, the growth of tonnage has declined a bit to where we're essentially flat, which is essentially a sign of our times. When customers have to spend more money to get the groceries they need and they don't have money to buy more, it's hard to keep growing tonnage."