Kroger executives warned Thursday that the supermarket has had to pass some of its higher product costs onto customers in the form of price hikes. The company noted it has experienced higher product cost inflation across most of its categories, including grocery and meat.
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"We are being disciplined in managing these increases. Our teams are doing an excellent job working to minimize the effects on our customers and our financial model by using our data and working closely with our suppliers," Kroger CFO Gary Millerchip told analysts on the company's earnings call. "We are passing along higher costs to the customer where it makes sense to do so. In some key areas, we are choosing not to pass through cost increases and continuing to invest in value for the customer."
Kroger emphasized that it is leveraging its proprietary data to be strategic in its pricing and personalization and offering consumers cheaper alternatives from its portfolio of Our Brands products.
The select price hikes come as Kroger beat Wall Street estimates for its fiscal third quarter, reporting total sales of $31.9 billion in the quarter, compared to $29.7 billion for the same period last year. Adjusted earnings per share came in at 78 cents, compared to 71 cents a year ago, and Kroger posted an operating profit of $868 million, up from $792 million a year ago.
In addition to inflation, Kroger continues to face ongoing supply chain issues ahead of the holiday season.
In order to address supply constraints, Kroger has kept additional warehouses added during the COVID-19 pandemic to help customers throughout the holiday season. The company has also deployed its owned and operated fleet to help alleviate supply chain pressure and has hired over 64,000 new associates during the third quarter to help fulfill demand during the holiday season.
Kroger shares are up 41% year to date.