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Kroger's digital push to drive 2022 sales, profit higher; shares jump

·2 min read
FILE PHOTO: A selection of Kroger brand products is seen in a grocery cart at a Kroger-owned King Soopers store in Golden

By Deborah Mary Sophia

(Reuters) - Kroger Co forecast annual same-store sales and profit above market expectations, encouraged by strong demand for its pick-up and delivery services as well as sustained home-cooking trends, sending its shares to a record high on Thursday.

The Ohio-based grocery chain, which also topped estimates for quarterly results, has benefited from Americans increasingly leaning on home delivery services rather than venturing out to stores, with its digital sales in the quarter more than doubling from pre-pandemic levels.

Kroger has ramped up its online business, from loyalty programs to memberships for unlimited home deliveries, while also opening automated fulfillment centers across the United States to support online orders through its partnership with British online supermarket Ocado Group.

"We are actively encouraging customers to engage with us on our digital platforms, even when shopping in store. That's because when a customer engages with us digitally, they spend more with Kroger," said Chief Executive Officer Rodney McMullen.

The company's reliance on automation and robotics has also helped shave costs at a time when margins across the retail industry are being hammered by inflation. Kroger's adjusted gross margin rate rose by 3 basis points in the quarter from last year.

"Kroger is striking the right balance of margin pass through and pricing as it uses its scale advantage to attract and retain new consumers while preserving gross margin rate," Evercore analysts said in a note.

The company said it expects full-year adjusted same-store sales to rise in the range of 2% to 3%, compared with estimates for a 2.1% increase, according to Refinitiv IBES.

Kroger, which operates nearly 2,800 U.S. stores, said it expects adjusted earnings per share of between $3.75 and $3.85 for the year, above estimates of $3.45.

Same-store sales, excluding fuel, climbed 4% in the quarter, topping expectations for a 2.84% rise.

(Reporting by Deborah Sophia in Bengaluru; Editing by Vinay Dwivedi and Amy Caren Daniel)