Kroger's Sales Rise after Digital Investments -- Update
By Jaewon Kang
Kroger Co. reported slightly higher sales in its latest quarter
thanks to investments to draw in new customers that are also
weighing on profit.
The increase to $28.2 billion in sales from $28 billion a year
earlier reversed three consecutive quarters of decline by that
measure. The grocer's preferred metric for sales, at stores open at
least 15 months, rose 2.5%.
Chief Executive Rodney McMullen said on a call with analysts
that the higher sales showed that Kroger's investments in its
digital operations and new product lines are paying off.
"We had our work cut out for us," he said. "We're energized by
Kroger's shares were up less than 1% at midday Thursday, to
The nation's largest supermarket chain is trying to keep its
footing in the rapidly changing grocery industry. Like other food
retailers, Kroger faces pressure to keep prices low as it invests
in delivery to compete better against Amazon.com Inc. and Walmart
Inc., the nation's top grocery seller.
Walmart and Target Corp. posted higher sales in their most
recent quarters as a result of investments that have boosted
digital sales. Discounter Grocery Outlet Holding Corp., which went
public in June, unveiled ambitious plans to increase the number of
its stores by 10% annually. Organic grocer Sprouts Farmers Market
Inc. recently lowered its guidance for the full year as growth
continues to slow.
Kroger is in the middle of a three-year plan to revive its
business with investments in technology and new hires. The
136-year-old company has added clothing items and financial
services to its sales strategy, as well as new grocery items like
store-branded meatless burger patties.
Cincinnati-based Kroger has expanded pickup and home delivery to
more stores and has opened automated warehouses for delivery as
part of its partnership with British retailer Ocado Group PLC.
Digital sales growth in the latest quarter slowed to 31% from
more than 50% a year ago as delivery and pickup services
The owner of Fred Meyer, Ralphs and Harris Teeter stores has
said the investments should generate $4 billion of free cash flow
through cost savings and better sales.
While sales improved, gross margins declined in the quarter amid
lagging profitability from Kroger's pharmacies. Kroger said it
still expects profit growth over 2019, but pulled its previous
guidance for operating profit of $400 million by 2020.
Kroger maintained its guidance for same-store sales growth of 2%
to 2.25% and adjusted earnings of $2.15 to $2.25 per share for
Write to Jaewon Kang at email@example.com
(END) Dow Jones Newswires
September 12, 2019 13:30 ET (17:30 GMT)
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