By Savyata Mishra
(Reuters) -Kroger said on Thursday it expects some impact on its fresh business amid escalating trade wars, even as the U.S. grocer forecast annual sales above Wall Street expectations.
Shares of the supermarket chain rose 3.3% after the upbeat forecast that came days after an abrupt ouster of long-time chief Rodney McMullen.
The company canceled its investor day planned for April, as it is searching for his replacement.
Company executives said as a domestic retailer Kroger had less exposure to international tariffs compared to some of its peers, and would not face “a massive impact”.
Rival Target, on the other hand, has warned that tariffs would pressure its first-quarter profit, and said it would double down on sourcing more of its products from countries including Guatemala.
Trade tensions, which Trump escalated on Tuesday by imposing new 25% tariffs on imports from Mexico and Canada and doubling duties on Chinese goods to 20%, could slam economic growth and raise prices for Americans reeling from still-high inflation.
Kroger is working on diversifying supplier base for its fresh category and focusing on other geographies that will be less affected by the tariffs, executives said on a post-earnings call.
Its Fresh business, which consists of items such as meat, seafood, deli, bakery, made up roughly 24% of its total sales in 2023, according to the company’s annual report.
Confident of its growth, Kroger forecast a rise of 2% to 3% in its full-year identical sales, excluding fuel, above analysts’ average estimate of a 1.96% increase, according to data compiled by LSEG.
“The forecast was strong, in our view, especially given heightened uncertainties this year (e.g., tariffs) and the recent shakeup to the management team,” CFRA analyst Arun Sundaram said.
The grocer has been benefiting from strong pharmacy sales and steady consumer demand for its low-priced groceries. It expanded its private label line in 2024 with more than 900 new products.
It has also been capitalizing on strong e-commerce demand offering customers convenient curbside pick. Kroger reported an 11% jump in fourth-quarter digital sales.
The company, which in December terminated its $25 billion deal with Albertsons, posted a 2.4% rise in quarterly identical sales, excluding fuel, compared with analysts’ average estimate of a 1.96% rise.
It sees adjusted earnings between $4.60 and $4.80 per share, compared with estimates of $4.79.
(Reporting by Savyata Mishra in Bengaluru; Editing by Shinjini Ganguli)
