Kroger Comps Dip for 2nd Straight Quarter
The Kroger Co. has reported a decline in comparable-store sales during its first quarter of fiscal 2017, marking its second consecutive decline in comps following a 13-year growth streak, and signaling its struggles amid deflationary times and an increasingly competitive market.
Kroger saw comps, sans fuel, soften 0.2 percent during the period, which ended May 20. The dip, however, was less than the 0.7 percent decline during Q4 2016, suggesting an ease of deflationary effects on the Cincinnati-based grocer.
Total sales increased 4.9 percent to $36.3 billion in Q1, compared with Q1 2016. Total sales, excluding fuel, grew 2.9 percent. The recent merger with ModernHealth contributed to sales growth.
Adjusted net earnings were $546 million, or 58 cents per diluted share. Kroger's net earnings for the first quarter last year were $696 million, or 71 cents per diluted share.
"We remain focused on our strategy; this will make a difference for our customers and create value for our shareholders,” said Rodney McMullen, chairman and CEO of Kroger. “We are running the business with an eye toward where the customer is going. Customers tell us they want to connect with us in multiple ways with the help of friendly associates to easily provide meals to their families at prices that enable them to stretch their budgets. We are committed to providing that experience, and we will not lose on price."
Added McMullen: "We are driving our strategy of lowering costs to reinvest in ways that provide the right value to our customers. We're pleased that identical-supermarket sales in the last nine weeks of the first quarter were positive, and that has continued in the second quarter to date."
Kroger continues to expect identical-supermarket sales growth, excluding fuel, of flat to 1 percent growth for 2017, and it continues to expect capital investments, excluding mergers, acquisitions and purchases of leased facilities, to be in the $3.2 billion to $3.5 billion range for 2017.
Positioning for the Future
During a call to discuss the earnings, McMullen pointed to several ways Kroger is preparing for future success. He noted that the company is making “meaningful investments” in digital and online growth, adding that customers of the future will want to shop with the retailer for anything, anytime and anyplace. During Q1, the grocer saw more than 30 percent growth in new digital customers and a more than 30 percent increase in digital visits, with faster growth in mobile, when compared with last year.
He also pointed to the grocer’s focus on people: customers and associates alike. For customers, the company is building out its personalization expertise, like with My Magazine, which delivers such personalized content as recipes to loyal households based on their shopping behavior and interests.
“In fact, we delivered more than six million unique My Magazine offers in the first quarter alone,” he noted. “This also allows us to offer personalized lower prices to our loyal households in addition to the low prices everyone can see. This is an example of how we leverage 84.51°’s expertise.”
And with associates, Kroger is increasing labor hours in certain areas and starting wages in particular markets. Taken together, the steps are anticipated to improve the customer experience and retention.