Kroger raised its annual sales projection on Friday because customers choose affordable groceries and store-brand items because of economic instability and rising prices caused by trade policies.
The U.S. supermarket chain increased its identical sales projection to 2.25% to 3.25% for the fiscal year from its initial forecast of 2% to 3%. The company maintained its profit projection because it believes its cost management strategies will succeed despite market challenges.
Interim CEO Ron Sargent explained that customers prefer promotional deals and store-brand products and will probably maintain their cautious spending habits throughout the year. The company has implemented price reductions for more than 2,000 products while planning additional discount promotions.
The majority of retailers reduced their guidance but Kroger’s positive outlook resulted in a 7% increase in its stock price. The company executives stated that price hikes will be their final option to handle any tariff-related expenses.
The company plans to reassess its online business after Ocado terminated its seven-year partnership by drawing down its credit line. The grocer plans to shut down about 60 underperforming stores throughout 18 months which will lead to a $100 million impairment charge during the first quarter.
The market received Kroger’s steady profit forecast positively from analysts because it demonstrated operational discipline.
