Supermarket Kroger (KR) reported that same-store sales growth more than doubled year-over-year to 3.4%, prompting the company to raise its full-year guidance and tighten its profit expectations.
The company reported $1.09 billion in first-in-first-out (FIFO) operating profit on $33.9 billion in sales. Adjusted Earnings Per Share rose 11% year-over-year to $1.04.
The company now forecasts that so-called ‘identical sales without fuel’ will grow between 2.7% and 3.4%, higher than the 2.25% to 3.25% that it forecast near the end of the second quarter. It’s the latest sign that Americans are hitting their local grocer or wholesale club rather than the drive-thru.
Over the last few years, there has been a disconnect between consumer sentiment surveys and the reports of many consumer discretionary stocks. Consumer-facing brands have held up strong in the face of higher inflation, with consumers choosing to shell out on fast food, entertainment, and other purchases in the face of sagging sentiment.
There has been a shift in recent months, though: in the latest quarter, a greater number of retail and fast food chains posted mixed results, showing that Americans were putting a greater emphasis on value and belt-tightening.
However, Thursday’s Consumer Price Index (CPI) report did send a warning shot across the bow of many wholesale stores and supermarkets. Grocery prices rose 0.6% month-over-month, double the pace of food away from home, possibly an indication of new pressures on grocery prices.
The BLS noted that this came as “all six major grocery store food group indexes increased in August.” However, food at home still holds a price advantage over the last year; it’s up just 2.7% year-over-year, while food away from home rose 3.9%.
Still, it seems Americans are voting with their wallet: buying all the ingredients and doing it yourself might be a mild inconvenience, but it’ll almost always be cheaper than shelling out $9 for a coffee or $20 for a hamburger with fries.
Kroger stock rose 0.24% in after hours trading.
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