Kroger is comping, so why can’t Walmart?
Repeated assurances by Walmart’s most senior executives that their top priority is growing U.S. same-store sales may be reassuring news to investors, but the company’s ability to do so by the end of the year now is a firmly established expectation. This is especially true, given the recent performance of once of the company top grocery competitors.
Kroger is knocking the cover of the ball and reported shockingly good first-quarter results this week. The company produced same-store sales growth, or identical-store sales growth as they like to call the approximate metric in the food channel, of 4.6%. That gain was better than the 3.8% analysts expected and the company parlayed the top line performance into profits. Earnings per share of 70 cents were well in excess of the 64 cents consensus estimate, and the prior-year performance of 58 cents. Looking ahead to the remainder of the year, the company raised its forecast for identical store sales growth to a range of 3.5% to 4.5% from a prior range of 3% to 4% also took up its full-year profit outlook to a range of $1.85 to $1.95 from $1.80 to $1.92 previously.
Product cost inflation, estimated to be 3.5% during the quarter, clearly helped the sales performance as Kroger indicated it is successfully passing suppliers’ price increases to customers, but the company also noted, as have other food retailers, that the pricing environment is rational, which means Walmart is passing through increased costs as well, and that should help its comp numbers even without a meaningful increase in customer traffic.