Kroger Co. raised its annual sales and profit forecasts Friday as inflation-hit consumers drive up demand for groceries and household essentials at the cost of discretionary goods. Shares of the Cincinnati, Ohio-based grocer whose quarterly results also topped estimates, rose 3.6% in premarket trading.
Grocery retailers tend to perform well in an economic turmoil as cash-strapped consumers prioritize spending on food and other essentials, with Kroger also benefiting from demand for its cheaper in-house items such as cheese and meats.
The grocery businesses of larger rivals Walmart Inc and Target Corp have seen a jump in sales in recent months as well.
However, the big box retailers' larger dependency on apparel and other discretionary products that have fallen out of favor has led to inflated inventories, more discounts and a drop in profits.
Kroger forecast adjusted same-store sales growth of 4% to 4.5% for fiscal 2022, compared with its prior outlook of a 2.5% to 3.5% increase.
The U.S. supermarket chain forecast annual earnings per share between $3.95 and $4.05, compared with its prior outlook of $3.85 to $3.95.
Kroger, which is focused on groceries, saw its attributable profit jump 56.5% to $731 million in the second quarter. Excluding one-off charges, it earned 90 cents per share, beating estimates of 83 cents a share.
Same-store sales, excluding fuel, climbed 5.8% in the second quarter, compared with estimates of a 4.6% rise, according to IBES data from Refinitiv.