By Deborah Mary Sophia
(Reuters) -Kroger on Thursday forecast annual sales and profit largely above Wall Street estimates, betting on higher demand for groceries at its stores, tighter cost control and the strength of its private-label brands.
Shares of the company, whose $24.6 billion deal to buy smaller rival Albertsons is facing an antitrust roadblock, jumped 8%, after it also beat expectations for fourth-quarter results.
More Americans are preparing meals at home instead of eating out, as grocery prices ease at a faster pace than restaurant menu prices, driving increased customer traffic and propping up sales at grocers.
“We expect consumer sentiment to improve in 2024, but our customers will still have to manage many of the same macro pressures as last year,” Kroger CEO Rodney McMullen said.
The company is leaning on lower prices and targeted promotions to drive demand in 2024. It also plans to add more than 800 new products to its private-label portfolio this year.
“Kroger, as well as the rest of the industry, is betting on positive volume sales at some point in 2024 … for Kroger, it’ll first and foremost likely come from its private-label portfolio,” CFRA Research analyst Arun Sundaram said.
The company said it would open new stores this year, joining a slew of retailers including Target and Walmart in a bid to gain market share.
Kroger plans to complete 30 major store projects this year, including adding new stores, relocations and expansions, the company’s interim CFO Todd Foley said, without providing further details on the store locations.
Rival Aldi said it would open 800 U.S. stores by the end of 2028. The German discount chain plans to open many of the new stores in states where Kroger and Albertsons are divesting 413 stores — including Southern California and Nevada — to appease regulators.
Kroger said it is committed to defending the Albertsons merger in court following the U.S. FTC lawsuit. It expects hearings to proceed in mid-to-late summer.
Kroger forecast fiscal 2024 identical sales, excluding fuel, to increase between 0.25% and 1.75%, compared with LSEG estimates of a 0.7% rise. It projected full-year adjusted per-share earnings of $4.30 to $4.50, largely above estimates of $4.34.
(Reporting by Deborah Sophia in Bengaluru; Additional reporting by Siddharth Cavale; Editing by Anil D’Silva and Shounak Dasgupta)
