The Kroger Co. said that its Restock Kroger transformation program is providing rewards to investors and has helped to position the company for success during the pandemic -- a time during which digital sales have soared.
The company told investors on Tuesday, Oct. 27 that the program, launched three years ago, is delivering shareholder return of 8% to 11% as the program continues to create value for customers, associates and other stakeholders.
"Our associates remain relentlessly focused on our customers, who are at the center of everything we do," said Rodney McMullen, Kroger's chairman and CEO. "Our customer obsession led us to make several strategic decisions three years ago to reinvent our business model to better serve our customers. We believed customers would continue to move to a seamless shopping platform that combined the best of physical and digital experiences.”
Such choices, he said, have helped Kroger to more effectively respond to the challenges of the pandemic. More broadly, the Restock Kroger program has led to significant savings, McMullen noted.
"Through the Restock Kroger framework and intensity around operational excellence, we are achieving cost savings of over $1 billion each year and are investing savings back into the business, with an emphasis on the customer and associate experience,” he said. “We are improving the customer experience by widening and deepening our competitive moats that include fresh, seamless, personalization and Our Brands. These moats are strong today and growing in relevance as customers eat more food at home.”
McMullen added that digital sales are four times higher than they were in 2017, and he also highlighted efforts focused on pay and sustainability.
“We are improving the associate experience by focusing on talent, culture and wage investments,” he said. “We are living our purpose through our commitments to a world with Zero Hunger | Zero Waste and our framework for action to advance diversity, equity and inclusion in our business and communities.”
He also said that the company's focus on culture and talent led to a 15% reduction in turnover from 2017 to 2019, and that retention rates continue to trend better than the retail industry average.
According to McMullen, the company has returned approximately $6.4 billion to shareholders via dividends and repurchased shares since the beginning of fiscal 2017. “Kroger is growing market share, and our Total Shareholder Return has outperformed the market and our peer group over the last 12 months," he noted, "and we are incredibly excited for the future."
Kroger also reconfirmed its 2020 guidance on identical sales, adjusted FIFO operating profit, adjusted earnings per diluted share and adjusted free cash flow.
"Prior to the pandemic, Kroger's early results in 2020 were strong, and while the pandemic has clearly been a tailwind to our business, we've been very pleased with the underlying progress with all key components of our model, including sales and market share growth, cost savings initiatives, and growth in alternative profit streams," said Gary Millerchip, Kroger's CFO. "Based on the strength of our execution against our competitive moats, our food expertise, unparalleled data insights, and expected structural shifts to food consumption at home as a result of COVID-19, we believe Kroger is well positioned to continue to differentiate and grow in the future. One year on from announcing our Total Shareholder Return target, we are well positioned to deliver on this commitment.”
On Sept. 11, the food retailer’s board of directors authorized a $1 billion share repurchase program, replacing the prior authorization. Earlier this year, Kroger increased the dividend by 13%, marking the 14th consecutive year of dividend increases.
Cincinnati-based Kroger employs nearly half a million associates who serve 9 million-plus customers daily through a seamless digital shopping experience and 2,800 retail food stores under a variety of banner names. The company is No. 3 on The PG 100, Progressive Grocer’s 2020 list of the top food and consumables retailers in North America.