Kroger Sales, Earnings Grow as Higher Costs Persist

“We are starting to see customers engage with coupons a little bit more aggressively,” Chief Executive Officer

Rodney McMullen

said on a call with analysts, adding that shoppers are also shifting to low-cost store brands.

Cincinnati-based Kroger said that identical sales, a metric that accounts for store openings and closings, grew 4% in the three months through January, excluding fuel sales. Identical sales were up about 15% compared with two years ago, before the virus reached the U.S.

Kroger shares were up about 9% Thursday morning.

Quarterly profit was $566 million, or 75 cents a share, a swing from a loss of 10 cents a share a year earlier. Stripping out one-time items, Kroger posted fourth-quarter adjusted earnings of 91 cents a share, above expectations of Wall Street analysts surveyed by FactSet.

Food prices have been rising for months, as manufacturers raise prices to offset growing costs in labor, transportation and raw materials. Food retailers, including Kroger, as well as restaurants are passing through such increases to consumers.

Supply-chain challenges persist across the food industry, Kroger executives said, though they expect those problems to alleviate through the year. Kroger said it is working with transportation companies from outside of the food industry and using data to receive products faster from manufacturers.

Digital sales doubled in the latest quarter from two years ago, though Mr. McMullen said that growth won’t be “linear” going forward as customers become more comfortable shopping in person.

Other food retailers are recording stronger sales, too.

Walmart Inc.

said its comparable sales rose 5.6% for the latest quarter, while

Albertsons

Cos. Inc. reported a 5.2% increase in identical sales for the quarter ended Dec. 4. Albertsons said earlier this week that it has started a strategic review to consider potential transactions and other moves to improve value for shareholders.

Looking ahead, Kroger said that it expects identical sales to grow by 2% to 3% and adjusted earnings per share to come between $3.75 and $3.85 in its 2022 fiscal year. Those forecasts surpassed the projections of outside analysts.

Food companies continue to struggle to meet demand amid continued shortages of labor, transportation and raw materials. Sports beverages and frozen food are among items in tight supply, and retailers said they are receiving incomplete, late orders from vendors. Many retailers are carrying whatever they can secure, including brands they never carried before.

Food retailers also are battling persisting labor shortages, with more companies tapping temporary workers to stock shelves, organize shopping carts and assist in-store chefs. Chains said they are boosting hourly pay and offering bonuses to appeal to workers, but many have switched industries, retired early or never returned to their jobs after leaving during the pandemic. Some companies said they are seeing improvements in the number of applications, though they aren’t at pre-pandemic levels.

As supermarkets grapple with labor shortages, some employees have been seeking higher wages and more benefits. More than 8,000 unionized workers at Kroger’s King Soopers went on strike for nine days in Denver in January before ratifying a new contract.

—Matt Grossman contributed to this article.

Write to Jaewon Kang at [email protected]