Kroger Rises as 2020 Profit Forecast Tops Analyst Estimates

(Bloomberg) -- Kroger Co. gained after saying profit next year will be better than analysts are predicting, a rare bit of good news for the beleaguered supermarket chain.

• Adjusted earnings per share will range from $2.30 to $2.40 in 2020, Kroger said in a statement Tuesday in advance of a presentation to investors in New York. That compares with the $2.19 average of projections. Kroger also said same-store sales excluding fuel, a key metric, should improve slightly next year.

Key Insights

• The nation’s biggest traditional grocery retailer is under siege on two fronts: Lower-priced discounters like Walmart Inc. and Germany’s Aldi are luring away value-focused shoppers, while Amazon.com Inc. this month continued its encroachment by making fresh-food deliveries free for its Prime members in 22 markets.
• While the outlook for conventional grocers like Kroger “seems especially challenged,” according to Morgan Stanley analyst Simeon Gutman, Kroger said in the statement that its business is “strong and durable” and will deliver improved profit performance over time.
• Same-store sales growth excluding fuel will be greater than 2.25% in 2020, Kroger said. It expects as much as 2.25% growth this year.
• Kroger is trying to offset the threats to its core business by expanding into new, more profitable areas like personal finance and digital advertising, but the prospects for those areas remain largely unknown, Gutman said. The company shed a bit more light on them Tuesday by saying they will deliver incremental profit of as much as $150 million next year, up from about $100 million in 2019.
• The company has also signed partnerships with drugstore chain Walgreens Boots Alliance Inc., Microsoft Corp. and Britain’s Ocado Group Plc to reach new customers and modernize its operations.

Market Reaction

• Kroger rose as much as 4.8% on Tuesday, the most intraday in almost three months. The shares had declined 9.1% this year through Monday’s close.

Get More

• For the full statement, click here.

To contact the reporter on this story: Matthew Boyle in New York at mboyle20@bloomberg.net

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Lisa Wolfson, Jonathan Roeder

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