Earnings

Kroger’s Fresh Food Push Drives Trips, Loyalty Amid Earnings Beat

Kroger

As Kroger aims to keep enhancing its customer connection with investments in what it calls its competitive moats, the grocer’s fourth-quarter identical sales without fuel increased 2 percent. Chairman and CEO Rodney McMullen said on an earnings conference call with analysts on Thursday (March 5) that fresh food remains an important sales driver for the supermarket chain.

“Our fresh departments drive trips, loyalty and gross margin,” McMullen said. He noted that the company’s Fresh for Everyone campaign has been “well received” and is “driving significant improvements in marketing effectiveness.” McMullen also said that Our Brands “achieved its best year ever,” as it came out above $23.1 billion in sales.

The executive said the company debuted 758 new Our Brands items in 2019, “which helped drive strong year-over-year sales lift” across the grocer’s brand portfolio. He also noted that Simple Truth has become the leading natural and organic brand in the country as of its rollout in 2013, with yearly sales coming out ahead of $2.5 billion in 2019.

“Kroger continues to invest in digital as we build a seamless ecosystem that combines the best of the physical store experience with the digital customer experience for our customers,” McMullen said. He noted that “this is where customers are increasingly going to meet their needs” and that “we know our customers value the greater convenience this provides.”

Kroger is approximately one year away from its first functional customer fulfillment center with Ocado in Monroe, Ohio, according to McMullen. As previously announced by the company in 2018, Kroger’s first CFC, which is an automated warehouse with robotic as well as digital functions, was to be constructed in the Cincinnati suburb, in partnership with Ocado.

McMullen noted in the Thursday call, “These facilities will accelerate our ability to provide customers with a seamless experience in a much more cost-effective way.” He also said, “we continue to be excited about the partnership.”

Kroger reported top- and bottom-line results that came out ahead of analyst’s $28.9 billion and adjusted earnings per share of 57 cents in the fourth quarter. Analysts had expected revenues of $28.83 billion and earnings per share of 55 cents.

The grocer’s stock jumped on the news, rising by approximately 8 percent as of 1:22 P.M. Eastern time as the Dow Jones Industrial Average dropped by roughly 3.5 percent.

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