Kroger Q2 Shows Mixed Results
Despite a return to positive comparable-store sales, the Kroger Co. revealed a decline in earnings and plans to stop reporting long-term guidance, the grocer noted during a call discussing earnings for its second quarter of fiscal 2017.
During the period, comps grew 0.7 percent, not counting fuel, following two consecutive quarters of declines. However, net earnings were $353 million, compared with $383 million during the same period a year prior.
Additionally, Rodney McMullen, Kroger chairman and CEO, said that the “dynamic operating environment” in today’s grocery sector has caused the grocer to continue providing annual guidance, as it has done for many years, but to no longer provide longer-term guidance. McMullen previously noted that the grocer remained committed to achieving net earnings per diluted share of growth rate of 8 percent to 11 percent.
McMullen added that Kroger is beginning to “create a vision” by sharing how it plans to redefine the customer experience to be “America’s inspiration and destination for everything food.” Initiatives include combining knowledge of food with the ability to personalize through the use of data analytics, leveraging new and ongoing partnerships to both deepen its connection with customers and drive revenue, and doubling down on digital.
Worth noting on the digital side, McMullen acknowledged that the grocer has 25 million digital customer accounts. Additionally, total digital sales were up in Q2, driven by ClickList, although digital sales numbers weren't shared.
Moreover, Mike Schlotman, EVP and CFO of the Cincinnati-based retailer, shared two elements of Kroger’s plan to make the “customer-first elements more aggressive, and faster, than ever before.” First, Kroger’s 84.51° division has helped the grocer redefine space optimization for the entire store, which will drive sales and operating profit growth as it “comes to live.” Second, it's making sure to have the right products at the right cost, and the right retail price for customers.
Comps for the remainder of fiscal 2017, excluding fuel, are anticipated to grow 0.5 percent to 1 percent. However, guidance doesn't include any effects from hurricanes Harvey or Irma. Although insurance provides coverage and caps losses at $26 million for each event, until the claim is finalized, it's difficult to provide an exact amount.
Kroger also is reportedly planning to unveil a new concept in the back half of fiscal 2017 that will compete with foodservice operators. According to WCPO Cincinnati, a restaurant called Kitchen 1883 is debuting at Kroger’s newest Marketplace store, on U.S. 42 in Union, Ky. Calling itself a “fresh new take on American comfort food,” the restaurant will feature a “made-from-scratch menu, hand-crafted cocktails and a family-friendly atmosphere.”