We look at Kroger’s further quarter performance and progress against its strategic plan, Restock Kroger.
Kroger’s key numbers
Kroger’s fourth quarter sales fell by 9.5% to $28.1bn, reflecting a 53-week financial year in 2017 and the sale of its convenience store business. Excluding these impacts and the acquisition of Home chef, sales increased 1.6%. Identical store sales were up 1.9%. For the full year, total sales fell 1.2% to $121.2bn, with identical store sales up 1.8%.
A year of transformation
Under the Restock Kroger strategic plan, 2018 was designated as a year of transformation. Focused on redefining the customer experience, several new initiatives were launched in the quarter to support this including a new strategic partnership with Microsoft, the launch of Kroger Pay and the expansion of is Home Chef meal kits business. For the year ahead, Kroger anticipates identical store sales of 2.0-2.25%. Kroger expects the uptick in performance to come from the space optimisation programme, which negatively impacted sales last year.
Developing alternative profit streams
However, the investments to support its transformation and digital business led to earnings per share to come in below expectations. The first year of the strategic plan, which is focused on growing operating income by an additional $400m by 2020, was always going to be challenging as it pulled forward investments in pricing, digital and store improvements.
However, Kroger is developing a range of alternative businesses to deliver the incremental profit growth. These include its data-science business, 84.51, and its Digital Media unit, both of which beat their operating profit targets in 2018. The retailer also delivered cost savings of $1bn through process improvements. The retailer expects the investments undertaken over the last 12 months to be tailwinds in the year ahead, ensuring it remains on track with its 2020 goal.
Source: IGD Research
Digital sales up 58%
Digital sales increased by 58% as it continued to expand its programmes. Its pickup or delivery services currently reach 91% of Kroger households. By the end of the year, this will rise to 100% with the full integration of Kroger Ship. The retailer’s private brands also continue to grow at pace, with unit share rising to a record 30.5% in the quarter. This was led by its Simple Truth range, with sales up 15.3%. Annualised sales for the brand stand at $2.3bn, reflecting the continued strong demand for natural and organic products.
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