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Kroger lifts profit, sales forecast on sustained grocery demand

The Pandemic-led trend of cooking at home continues even as virus restrictions have eased, keeping sales at grocery chains that benefited during last year’s lockdowns elevated.

A rise in U.S. COVID-19 cases during the third quarter also boosted sales at grocers, with some like Costco Wholesale Corp (NASDAQ:COST) forced to reinstate limits on purchases of items including tissues, roll towels and bottled water, as consumers resumed hoarding goods.

Kroger third-quarter sales rose 7.2% to $31.86 billion, beating analysts’ estimates of $31.23 billion, according to Refinitiv IBES data.

The company has been spending heavily on increasing shipping capacity and ramping up manufacturing at factories that produce its private-label products to overcome global supply-chain disruptions and avoid a shortage of products on its shelves during the holiday season.

Those expenses, along with an increase in wages, led to a 41 basis point decline in the company’s adjusted gross margin rate, mirroring results from peers Walmart (NYSE:WMT) Inc and Target Corp (NYSE:TGT) which have also seen their profit margins squeezed due to higher labor and freight costs.

Kroger said it expects full-year adjusted earnings per share of $3.40 to $3.50, compared with its prior forecast of $3.25 to $3.35.

The company said it expects full-year same-store sales to dip 0.2% to 0.4%, compared with its prior forecast of a fall of 1% to 1.5%.

Excluding one-time items, Kroger earned 78 cents per share in the third quarter, beating estimates of 66 cents per share.

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