Kroger Q2 Tops View As Natural Foods Rise
Kroger Co. (KR) lifted its full-year same-store-sales and earnings outlook after posting second-quarter results that sailed past views. The giant grocer's Q2 earnings soared 25.7% to 44 cents a share, beating estimates by analysts polled by Thomson Reuters for 39 cents and marking an acceleration in growth from Q1's 15% gain. Sales rose 0.9% to $25.54 billion, ahead of views for $25.5 billion. Excluding fuel, sales were up 5.7%.
Identical supermarket sales, without fuel, jumped 5.3% vs. a year earlier, exceeding the 4.7% gain expected by analysts polled by Consensus Metrix.
Based on its strong year-to-date results, Kroger (KR) now sees fiscal 2015 earnings of $1.92-$1.98 per share vs. previous guidance for $1.90-$1.95 per share. Analysts see EPS of $1.96.
Kroger also raised its fiscal 2015 identical supermarket sales growth guidance, excluding fuel, to a range of 4%-5% from 3.5%-4.5%.
Shares closed up 5.3% to 37.29.
Organics Stay Healthy
Kroger and other traditional grocers and retailers such as giant discounter Wal-Mart (WMT) have been expanding their organic and natural food offerings as they move to feed the appetites of millennials, baby boomers and others in the growing portion of the population craving healthier food.
"We continue to see outstanding double-digit identical sales growth in our natural foods department," said Kroger CFO Michael Schlotman on a conference call Friday.
Jefferies analyst Mark Wiltamuth figures Kroger's natural and organic food represents $4 billion to $5 billion in annual sales for Kroger, a hefty chunk of its more than $30 billion total.
He also calculates that the category contributes at least half a percentage point to identical-store sales.
Kroger has become so competitive in the sector that upscale organic big shot Whole Foods Market (WFM) plans to start opening 365 By Whole Foods stores in 2016.
The stores will offer "convenience and everyday low prices on natural and organic products that meet the company's industry-leading standards for quality," Whole Foods said in a statement earlier this year.
Kroger continues to invest in boosting its business, noted CEO Rodney McMullen. For example, stores are hiring to fill 20,000 permanent jobs.
