Retail

Kroger Earnings Preview: Watch For Subscription Services

Kroger Earnings Preview: Watch For Subscriptions

Kroger will announce its earnings on Friday (Sept. 9) at the market’s open, marking the end of an aggressive second quarter in which the supermarket giant finds itself competing beyond its traditional category competition and going up against Amazon and Walmart.

By the numbers, analysts are expecting about a 5 percent revenue increase over Q1. The overall number is consistent with the supermarket industry, but more importantly, Kroger will need to show that it continues to capture the digital shift for grocery. Its eCommerce numbers grew 97 percent in Q1 compared to 2019 numbers. A good deal of that success depends on the Kroger Ship program, which had been in place since 2018, but has ramped up in terms of infrastructure and usage during the pandemic.

"The expansion of our Kroger Ship platform will continue to bring together our industry-leading customer insights and merchandising data to offer our customers a digital shopping experience that includes staples available in our physical stores as well as products that are exclusive to Kroger.com," said Stuart Aitken, Kroger's senior vice president and chief merchant and marketing officer, in a statement. "As part of our continuing transformation, we look forward to accelerating the development of our e-commerce platform and providing our customers with even more choices."

Where will that expansion come from? The earnings call on Friday could be notable for Kroger’s reaction to Walmart’s new subscription and delivery service, Walmart+.  Kroger has countered with tests of a service called Delivery Savings Pass, which allows consumers to get unlimited delivery via Instacart of grocery orders over $35 for a $79 annual fee. Several reports say the new service is being tested in Dallas and Southern California, and could be rolled out nationally to include more loyalty perks, possibly tying in gasoline.

Internally, the company has been focused on the Restock Kroger program, its initiative to become a digital-first retailer while extending store services to the customers who want them. Analysts are expecting to hear more about that on Friday.

“The company’s Restock Kroger program – involving investments in omnichannel platform, identifying margin-rich alternative profit streams, merchandise optimization, and lowering of expenses – has been gaining traction,” says Yahoo! Finance. “Notably, the company has been prioritizing actions to resonate well with the prevailing crisis and burgeoning demand for necessary commodities. Realizing the need of the hour, the company has been offering a no-contact delivery option, low-contact pickup service and ship-to-home orders. Cumulatively, these have been aiding identical supermarket sales.”

Based on August 2019 data, grocery consulting firm Brick Meets Click (BMC) estimated that 13.1 million U.S. households were active online grocery customers. A similar BMC survey in March 2020 showed a rise to 39.5 million households. By May 2020, that number had risen to 43 million.

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