(Reuters) – Kroger Co on Thursday raised its forecast for annual profit and topped quarterly sales estimates, as investments to improve its pickup and delivery services helped the U.S. grocer counter slowing at-home eating trend and fend off competition.
The company has bolstered its business through its “Restock Kroger” program and its partnership with UK-based Ocado Group Plc to use robots to more quickly stock, sort and dispatch goods.
The operator of Ralphs and Fred Meyer stores has also tied-up with third parties such as Instacart to handle deliveries.
The investments have paid off, with Kroger posting triple-digit growth in online sales since the beginning of 2019, even as big-box rivals Walmart Inc and Target Corp as well as Amazon.com Inc sharpened their focus on grocery.
In the first quarter ended May 22, Kroger’s digital sales jumped 16%, helping it post a smaller-than-expected decline in same-store sales.
Revenue came in above pre-pandemic levels at $41.3 billion, also topping estimates of $39.78 billion. On an adjusted basis, Kroger earned $1.19 per share, beating estimates of $1.01.
The reported quarter was also propped up by strong performance in the company’s alternative profit business, which includes media, and financial products and services.
Kroger forecast 2021 adjusted profit per share between $2.95 and $3.10, compared with its prior range of $2.75 to $2.95.
The company expects 2021 adjusted same-store sales to fall between 2.5% and 4%, while it had earlier projected a decline of between 3% and 5%.
“We do not believe most investors expected a print this strong, nor a guidance raise this substantial,” J.P. Morgan analyst Ken Goldman said.
The forecasts were also above estimates. Analysts on average were expecting earnings of $2.86 per share and comparable sales to decline 4.38%, according to IBES data from Refinitiv.
Shares in Kroger, which unveiled a new $1 billion share repurchase program, were up marginally in premarket trading.
(Reporting by Praveen Paramasivam in Bengaluru; Editing by Sriraj Kalluvila)
