Buoyed by private label and digital sales, Kroger raises its financial forecast

Kroger, which is awaiting federal approval for its proposed $24.6 billion acquisition of Albertsons, raised its full-year financial forecast Thursday after reporting strong third quarter earnings thanks to growth in private-label sales and digital orders.

For the quarter ended Nov. 5, the Cincinnati-based grocery giant reported same-store sales growth, minus fuel, rose 6.9%. Same-store sales of Kroger’s Our Brands private-label line jumped 10.4% and the company’s digital sales channel grew 10%.

Kroger reported operating profit for the quarter of $841 million, a 3.1% drop over the year-ago period. The grocer saw a gross margin rate of 21.4%, down five basis points compared to third-quarter 2021.

“Kroger’s value proposition, which includes providing great quality, fresh products at affordable prices, data-driven promotions, trusted Our Brands products and an industry-leading fuel rewards program, is resonating with shoppers and driving increased customer loyalty,” Kroger CEO Rodney McMullen said in a statement, in advance of a planned morning call with analysts. “This quarter demonstrates the strength of our approach to growing our business.”

Kroger said it now expects identical-store sales, without fuel, to be in the range of 5.1% to 5.3% for the year.

“Our consistent execution of our go-to-market strategy continues to build momentum in our business results and gives us the confidence to raise our full-year guidance,” Kroger CFO Gary Millerchip said in a statement.

During the quarter, Kroger introduced 147 new private-label items, including holiday-focused products. The company also launched its Our Brands Innovation Summit, a program designed to discover new private-label items that align with market trends.

Digital sales continue to be a major focus for the company. Kroger said it increased delivery sales by 34% over last year, driven by its Kroger Boost membership program and its growing network of customer fulfillment centers. The grocer also launched Kroger floral and sushi delivery with DoorDash in more than 1,000 locations.

Kroger operates nearly 2,800 stores in 35 states under 28 banners including Kroger, Ralphs, Dillons, Smith’s, King Soopers, Harris Teeter and more.

McMullen was joined this week by Albertsons CEO Vivek Sankaran in front of a Senate Judiciary subcommittee panel in Washington, D.C. to defend the proposed merger of the two grocery retailers.

Under the merger agreement announced Oct. 14, Kroger would acquire rival Albertsons, forming a national supermarket operator with 4,996 stores, 3,972 pharmacies, 66 distribution centers, 52 manufacturing plants, 2,015 fuel centers and more than 710,000 associates across 48 states and the District of Columbia, serving a customer base of 85 million households annually.

Lawmakers, grocery unions and others have raised concerns about a merger of that magnitude. The deal awaits federal regulatory approval.