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Our customers ‘actually enjoy it’

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Kroger CEO Rodney McMullen said Friday the pandemic-related spike in food prices is subsiding, while the at-home cooking trend is here to stay even after the coronavirus situation improves. 

“As we look forward, we see lower inflation than what it’s been over the last several months. It’s one of the reasons why we didn’t pass through all of the inflation that we incurred in the second quarter,” he said on CNBC’s “Closing Bell.” 

“When you look at meat especially, and some of those areas, … we do not see the inflation the way it was earlier in the year as the plants come back on,” he said. “There’s plenty of raw materials supply out there. It’s just a matter of the plants being able to process it.” 

On the other hand, McMullen said he believes the increase in cooking that was sparked by the Covid-19 outbreak — as restaurants were forced to shutter their dining rooms and lockdown orders kept families cooped up at home — will outlast the health crisis. 

“When we talk to our customers, what they tell us — and it’s fascinating — if they have young kid they love baking with their kids, and it’s something they enjoy doing together. If they have older kids, it’s like, ‘Well, we really enjoy time together,'” said McMullen, whose comments followed Kroger’s strong earnings report earlier Friday. 

“So everything that we can see, it’s something that will be a long-term trend because people have, one, learned how to cook and, two, found they really enjoy it. And the other thing that’s special, is when families eat as a family, they stay together. The kids don’t get into as much trouble. Those kinds of things,” he added. “But for us the thing that gives us the most excitement, our customers are telling us they actually enjoy it.” 

The Cincinnati-based grocer reported earnings before the bell Friday that surpassed Wall Street expectations on the top and bottom lines. Revenues checked in at $30.49 billion, when analysts were looking for $29.95 billion. Earnings per share of $0.73 beat forecasts of $0.55.

A customer walks past the frozen food aisle inside a Kroger Co. grocery store in Louisville, Kentucky.

Luke Sharrett | Bloomberg | Getty Images

Kroger shares closed lower by 1.07% Friday to $34.37 apiece. The stock has outpaced the broader market this year, having risen 18.61% so far in 2020. The S&P 500 is up a little over 3% in that time. 

Reflecting optimism about sustained demand for groceries, Kroger also hiked its guidance and indicated it expects same-store sales, excluding fuel, to rise greater than 13% for the year. That is up from its previous forecast of growth greater than 2.25%.

Kroger also saw its online sales rise 127% in the quarter, building on the 92% growth it reported in the prior quarter as the coronavirus pandemic intensified across the U.S. 

Earlier this month, Walmart announced it was launching a paid subscription service, called Walmart+, with grocery delivery being a key component of it. Walmart is the country’s largest grocer, while Kroger is the nation’s biggest supermarket chain. 

McMullen said Kroger’s digital grocery offering, which it had been investing in prior to the pandemic, is distinct from its rivals.’ 

“For us, it’s the whole total experience. … One of the reasons why our digital business is strong is things that are personalized. We do incredibly well on fresh. Customers tell us and they expect that our fresh is really good, and good relative to our competition, and it’s really all of those things together,” he said. 

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New map shows where China’s latest virus cases are clustered

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More than half a year since Covid-19 stalled its spread within mainland China, new clusters of cases have emerged in and around the capital city of Beijing in the last few weeks.

Here’s a look at the provinces that have reported confirmed coronavirus cases since Dec. 1, with darker shades representing areas with higher number of cases:

The persistent spread of the virus, particularly in the province of Hebei that surrounds Beijing, has prompted authorities to lock down several regions and urge people nationwide not to travel during the upcoming Lunar New Year festival. The holiday officially falls this year in mid-February.

“Considering the swift responses by local governments, the efficient test and tracing systems and the ongoing vaccine rollout, we believe the situation will be eventually brought under control,” Ting Lu, chief China economist at Nomura, said in a Jan. 18 note. “However, the unusually cold weather and the incoming lunar new year (LNY) travel rush could make the task of containing the virus more challenging.”

“The hospitality sector is set to slow, while the industrial sector may remain solid,” Lu said, adding that “markets may need to lower their expectations for strong pent-up consumption demand during the upcoming LNY holidays in mid-February.”

Hebei province began disclosing a spike in coronavirus cases at the start of this year, with daily numbers topping 90 last week. The figures do not include the many asymptomatic cases found through mass testing.


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Richard Branson on travel recovery, rollout efforts

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Sir Richard Branson told CNBC on Tuesday he hopes so-called Covid vaccination passports will be available for prospective airline passengers who have been inoculated, potentially allowing them to bypass other virus mitigation measures before traveling.

“Vaccination is everything. Once vulnerable people, in particular, have been vaccinated, I think all kinds of businesses can start opening up again: restaurants, travel companies, cruise companies,” said Branson, who co-founded the airlines Virgin Atlantic and Virgin Australia.

“Hopefully there will be a proof-of-vaccination piece of paper that people can use to be able to get on a plane without having to be tested or without having to quarantine,” the British businessman added in an interview on “Squawk on the Street.”

Branson’s comments come a week after the U.S. Centers for Disease Control and Prevention announced it would require airline passengers to show they recently tested negative for the coronavirus before flying to the country.

And on Monday, President-elect Joe Biden‘s spokeswoman Jen Psaki said in a tweet the incoming administration will keep in place an entry ban on most visitors from Europe, the U.K. and Brazil. That announcement came shortly after President Donald Trump said he would lift the travel restrictions.

Covid vaccination passports are a way for people to prove they have been inoculated against the disease, and some believe they can aid the economic recovery from the pandemic. A group backed by Microsoft and Oracle called the Vaccination Credential Initiative was recently launched. The coalition is working to develop a way for people to get an encrypted digital version of vaccination records, which could then be stored in a digital wallet of choice, such as the Apple Wallet or Google Pay.

“As the world begins to recover from the pandemic, having electronic access to vaccination, testing, and other medical records will be vital to resuming travel and more,” Mike Sicilia, executive vice president of Oracle’s Global Business Units, said in a press release about the initiative.

Airlines and the travel industry writ large have been hit hard by the coronavirus pandemic. Industry executives have consistently pointed to widespread Covid vaccinations as key to a robust recovery.

While air travel not at its pandemic-era lows, Branson said he believes there will be an uptick in the coming months as vaccinations continue to be rolled out. He complimented efforts across Great Britain to administer vaccinations, as well as Biden’s pledge to have 100 million Americans vaccinated in 100 days.

“I would hope in three or four months time, once most of the vulnerable people have been vaccinated, that we can start looking forward to late spring or summer beginning to get back to normality again,” Branson said.


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Cramer says his ‘Go’ list stocks are still worth buying, despite gains

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