Kiwi-born executive Greg Foran, CEO of US supermarket giant Kroger, is currently facing significant challenges. Kroger is one of America’s largest grocery retailers, operating thousands of supermarkets and multi-department stores across the United States. Foran recently reduced the company’s sales guidance for the year, noting that higher fuel prices have contributed to tighter conditions where “customers are buying more on need”. He observed that consumers remain disciplined in their purchases, actively shopping but being selective about what they buy.
This consumer caution at Kroger reflects broader inflationary pressures across the US economy. Earlier in the week, food manufacturer General Mills signalled further price rises are imminent, citing a 40 per cent surge in logistics costs due to escalating diesel prices. America’s national diesel price hit a record US$6 a gallon recently, contributing to hotter-than-expected US inflation numbers. This development has all but cemented expectations for the Federal Reserve to lift interest rates by 0.25 per cent next week, with an 87 per cent probability now priced in by money markets, potentially followed by another hike in December.
Despite these economic headwinds, Wall Street’s S&P 500 actually rose by 0.8 per cent on Friday night. This suggests investors may have already priced in anticipated Fed rate hikes and remain relatively unfazed. The market’s resilience is largely attributed to the artificial intelligence boom, which has driven robust earnings growth. S&P 500 earnings grew 40 per cent in the first half of the year and are expected to increase by 25 per cent in the second half, with long-term profit expectations at historic highs. For now, this AI-driven momentum appears to overshadow concerns about inflation and rising bond yields.
