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03/03/2022

Kroger Caps Off Year of Record Growth

Sales, earnings up despite cost pressures
Gina Acosta
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During the fourth quarter, Kroger completed the conversion of specialty cheese shops under the Murray's Cheese brand in 260 stores.

The inflationary and supply chain crises are proving to be no match for an ascendant Kroger, which reported increases in sales and profit during the fourth quarter.

For the fourth quarter ended Jan. 29, same-store sales increased 4% at The Kroger Co. Digital sales grew 105% on a two-year stack. Total company sales were $33 billion in the period, compared to $30.7 billion for the same period last year. Total company sales, excluding fuel, increased 3.7% compared to the same period last year. Net income at Kroger totaled $566 million, or 75 cents per share, a 1.7% increase from the prior year period. Adjusted EPS was 91 cents. 

"Our strategy of leading with fresh and accelerating with digital propelled Kroger to record performance in 2021, on top of record results in 2020. We are incredibly proud of our associates who continue to deliver for our customers through the pandemic," CEO Rodney McMullen said. "As we look to 2022, we expect the momentum in our business to continue and have confidence in our ability to navigate a rapidly changing operating environment. We are leveraging technology, innovation, and our competitive moats to build lasting competitive advantages. Our balanced model is allowing us to deliver for shareholders, invest in our associates, continue to provide fresh affordable food to our customers and uplift our communities."

Kroger's said it expects same-store sales growth of 2% to 3% without fuel, and adjusted EPS between $3.75 to $3.85, in fiscal 2022. 

"Kroger's 2021 results demonstrate the strength of our value creation model, and in 2022 we expect to build on this momentum," said Gary Millerchip, Kroger's CFO. "We will continue to be disciplined with capital allocation. In 2022, we are increasing capital investments in strategic priorities that will drive sustained future earnings growth. At the same time, we expect to generate strong free cash flow and we will continue to return excess cash to shareholders. We remain confident in our ability to achieve attractive and sustainable total shareholder returns of 8-11% over time."

For the full year of fiscal 2021, revenue at Kroger was $137.9 billion, an increase of 0.2%. Net earnings for fiscal 2021 were $1.6 billion, an increase of 1.2%.

Kroger returned $2.2 billion to shareholders in 2021. The company repurchased $1.6 billion of shares in 2021, under its board authorizations. Kroger also increased the dividend by 17% from 72 cents to 84 cents, marking the 15th consecutive year of dividend increases, which resulted in a payout of $589 million.

During the quarter, Kroger successfully completed the initial phase of its in-store End-to-End Fresh initiative and is currently expanding the program to targeted stores across the country. 

Its private label division Our Brands launched 72 new items during the quarter, many in support of providing easy food at home meal solutions, including Simple Truth skillet meals for two and Kroger brand multi-serve tray meals.

The company completed the conversion of specialty cheese shops under the Murray's Cheese brand in 260 stores. It launched a floral pilot in partnership with DoorDash in the Houston and Dallas divisions, enabling fresh floral delivery to customers in as little as 1-hour. During the fourth quarter, Kroger also opened the first Kitchen United MIX ghost kitchen location providing customers the opportunity to enjoy restaurant meals from a variety of participating restaurants.

The retailer also opened another customer fulfillment center powered by Ocado in Forest Park, Ga., and a cross-dock spoke facility in the Indianapolis area. This week Kroger announced it will offer more Americans delivery through the addition of a customer fulfillment center in a new geography: northeast Ohio.

"Kroger is incredibly excited to expand our delivery business in our home state and provide northeast Ohioans access to thousands of fresh and popular products, including our industry-leading Private Selection and Simple Truth brands, through our Customer Fulfillment Center," said Gabriel Arreaga, Kroger's SVP and chief supply chain officer. "The Cleveland region facility is an accelerant to our strategy to achieve the doubling of our digital sales and profitability rate by the end of 2023, and we're eager to provide a rewarding experience for our new customers in northeastern Ohio and Pennsylvania and create new jobs for individuals passionate about technology, engineering, operations, logistics and transportation, inventory and quality management, and customer service and engagement."

The customer fulfillment center will measure 270,000 square feet and is expected to create up to 400 new jobs. It's expected to become operational 24 months after the site breaks ground and will service areas in northeastern Ohio and Pennsylvania.

Kroger unveiled its Monroe, Ohio, customer fulfillment center in April 2021, its first, followed by centers in Groveland, Fla., and Forest Park. The Dallas fulfillment center is slated to open this spring with additional customer fulfillment centers slated for California, Frederick, Md., Phoenix, Ariz., Pleasant Prairie, Wis., Romulus, Mich. (Detroit), as well as South Florida and the Northeast and West.

The Kroger Co. plans to livestream a business update from its Groveland customer fulfillment center March 4 at 8:30 a.m. ET. 

Also this week, Kroger announced it will donate additional $1.1 million into The Kroger Co. Foundation Racial Equity Fund to catalyze innovative approaches to help create more equitable and inclusive communities.

Serving 60 million households annually nationwide through a digital shopping experience, and almost 2,800 retail food stores under a variety of banner names, Cincinnati-based Kroger is No. 3 on The PG 100, Progressive Grocer’s 2021 list of the top food and consumables retailers in North America.

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