Kroger Co. says inflation is starting to creep up, but that it’s too early to tell if higher prices are permanent.
The Cincinnati-based supermarket operator says it is planning for inflation of 1% to 2%, but that prices are increasing at a faster pace in its fresh-food departments.
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"We are seeing, as I think would be consistent across the industry, some increasing cost flows starting to flow through in grocery," Kroger CFO Gary Millerchip on the company’s first-quarter earnings call on Thursday.
He noted produce and meat prices tend to be more volatile in the short term.
The Bureau of Labor Statistics’ consumer price index released last week showed at-home food prices rose 0.4% in May, matching the increase for April.
The index for meats, poultry, fish and eggs was up 1.3% month over month in May. The increase was mostly due to a 2.3% jump in beef prices. Fruit and vegetable prices were flat as the index for fresh vegetables rose 0.5% while the index for fresh fruit declined 0.3%.
Kroger CEO William McMullen said it was "hard to tell" if the price increases would continue once the supply chain disruptions caused by COVID-19 were remedied.
Regardless, McMullen says Kroger is ready for any environment and that his company "operates the best when inflation is about 3% to 4%."
He added that inflation that is not driven by "true cost changes" results in the company’s in-house brands taking share from large national brands as shoppers look for lower-cost substitutes.
Kroger on Thursday reported first-quarter net earnings of $140 million, or $1.19 per share, above the $1.01 that analysts surveyed by Refintiv were expecting. Revenue fell 0.6% to $41.3 billion.
The company raised its annual profit guidance to between $2.95 and $3.10 per share, compared with its prior range of $2.75 to $2.95.
Kroger shares were up 18% this year through Wednesday, compared with the S&P 500’s 12% gain.