RBC projects flat Kroger sales, Walmart grocery gains in Q2

Investing.com -- RBC Capital Markets released new food retail sales projections based on Circana scanner data showing mixed results across major grocery retailers.

Kroger's first quarter identical sales are tracking close to flat, according to RBC's proprietary tool, which shows a 95% correlation to the retailer's actual sales growth. Food channel dollar sales in Kroger regions declined 0.9%, driven by volume down 1.9% and partially offset by price increases of 1.1%. The projection includes an estimated 130 basis point headwind from the Inflation Reduction Act. Transaction data suggests stronger performance than scanner data indicates. Kroger management previously stated it expects first quarter identical sales near the low end of its full-year guidance range of 1% to 2%.

Albertsons' first quarter identical sales are projected to decline 1.4% based on RBC's analysis, which has a 98% correlation to core grocery sales growth. Food channel dollar sales fell 1.2%, with volume down 2.3% and price up 1.2%. The bank estimates 2% pharmacy growth for the quarter. This projection falls below Albertsons' guidance range of flat to 1% growth.

For Walmart U.S., RBC projects second quarter comparable sales growth of 4.0%, with grocery comparable sales also up 4.0%. The bank expects food inflation of 0.8% in the quarter. Food channel dollar sales in Walmart regions declined 0.8%, with volume down 2.2% and price up 1.4%. RBC assumes general merchandise comparable sales will decelerate modestly to 1.5% and health and wellness will grow 5.0%.

The bank noted that Walmart has not yet materially passed fuel-related costs to consumers, but price increases appear likely if costs remain elevated.

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