Despite continued pressure from inflation and supply chain snarls, Kroger said on Thursday it's navigating a difficult economic environment and boosted its sales outlook for the year.
The nation's largest supermarket chain reported a $483 million profit for its third quarter, down 23% from the same period last year. Its sales climbed 7% to $32.9 billion.
The results beat Wall Street expectations.
Wall Street analysts had predicted the Cincinnati-based company would post a $505 million profit before one-time items on sales of $31.2 billion, according to Zacks Investment Research. Last year, Kroger reported a $631 million profit on sales of $29.7 billion for the same quarterly period.
"Our agility, and the commitment from our amazing associates, is allowing us to navigate current labor and supply chain conditions," CEO Rodney McMullen said in a statement. "Our focus on execution, combined with our continued discipline... allowed us to exceed internal expectations and deliver strong sales and earnings growth."
Supply chain disruptions, costs
The lingering COVID-19 pandemic continues to weigh on the U.S. economy, blamed for labor shortages and supply chain snarls across multiple industries. Smaller, tighter supplies is raising costs for food, fuel and other items consumers need.
Kroger's shrinking gross profit margin, which slid to 21.7% from 22.1% a year ago, indicates the grocer is eating some of the higher prices in a bid to keep shoppers coming to stores.
While the 0.41% drop in profit margin seems small, it adds up to big numbers. Had Kroger's profit margin been the same as last year, it would have reaped an extra $130 million in gross profit.
Rising prices caused by supply chain disruptions have raised concern among federal policymakers.
Earlier this week, the Federal Trade Commission ordered Kroger, Procter & Gamble and other major retailers and suppliers “to turn over information to help study causes of empty shelves and sky-high prices.”
Kroger CEO meets with President Biden
President Joe Biden on Monday also hosted a "roundtable discussion" with Kroger and other major U.S. companies to understand their holiday outlook and "steps companies have taken to overcome supply chain bottlenecks."
After the meeting, McMullen issued a statement: "We thank the Biden Administration for their efforts to alleviate current supply chain concerns," adding the company officials "feel great" about meeting customers' needs.
Despite the headwinds, the Cincinnati-based grocer on Thursday predicted its 2021 sales and profits would be better than previously forecast.
Kroger predicted its sales for the year would be better than previously predicted. The company forecast its identical sales would decline by 0.2% to 0.4% in 2021, compared to the previous estimate of a 1% to 1.5% drop. The company also raised its annual profit forecast before one-time items from $2.5 billion to $2.6 billion.
In addition to Kroger stores, the grocer operates several regional supermarket chains in 35 states, including Fred Meyer, Harris Teeter, Ralphs, Mariano's, Fry's, Smith's, King Soopers, QFC and others. The company has nearly 2,800 stores and employs 465,000 workers.
For the latest on Kroger, P&G, Fifth Third Bank and Cincinnati business, follow @alexcoolidge on Twitter.
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