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Kroger’s Q1 Led By Better-Than-Expected Grocery Performance

Digital sales also grew more than 8% during the quarter
Emily Crowe, Progressive Grocer
Mt. Carmel, Ohio / USA - March 30 2020: Pharmacy Parking and Pickup signage at the first Kroger Pickup (Location Only). Helpful to due to COVID-19 pandemic. ; Shutterstock ID 1689059920
Combined, Kroger’s delivery and pickup business saw double-digit growth in Q1.

The Kroger Co. has reported solid financial results for its first quarter of 2024 thanks to growth in digital sales, increased total household penetration, better-than-expected performance in its grocery business and more. Total company sales were $45.3 billion during the quarter compared to $45.2 billion for the same period in 2023. 

Excluding fuel, sales increased 0.6% compared to the same period last year. The grocer’s Q1 gross margin was 22.4% of sales, and the FIFO gross margin rate, excluding fuel, decreased 7 basis points compared to the same period last year. That decrease was attributable to lower pharmacy margins and increased price investments, Kroger said.

Digital sales grew more than 8% during the quarter, and Kroger’s delivery and pickup business combined for double-digit growth. According to the grocer, Q1 also brought increased total households, loyal households and customer visits.

Indeed, reported that between January and May, the Kroger banner accounted for 47.4% of visits to its grocery portfolio, while Fred Meyer racked up 7.6%, Ralphs and Harris Teeter both saw 6.3%, and Smith’s Food and Drug accounted for 6.2%. Additionally, the grocer’s largest banners, including Kroger, Fred Meyer, Ralphs, Harris Teeter, Smith’s, Fry’s, King Soopers and Food 4 Less, all saw year-over-year foot traffic growth in for the quarter.

"Kroger is off to a solid start in 2024 led by better-than-expected performance of our grocery business,” said Chairman and CEO Rodney McMullen. “Kroger is delivering exceptional value at a time when many customers need it more than ever, by providing affordable prices with personalized promotions. We appreciate our associates who are elevating the customer experience and improving store execution. Together, this is growing households and increasing customer visits.”

Continued McMullen: “The long-term investments we have made to strengthen and diversify our model enables us to manage economic cycles and gives us the confidence to deliver on our full year outlook. By delivering value for customers and investing in our associates, Kroger remains well-positioned to generate attractive and sustainable returns for our shareholders."

Digital was a bright spot in Q1, with Kroger increasing delivery sales by 17% over last year, and also increasing digitally engaged households by 9%. The grocer also achieved a new record for quarterly pickup fill rate.

On the own brand side, Kroger introduced 346 new private label products and launched Field & Vine, a new brand that offers high-quality and regionally grown berries. 

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Kroger has reaffirmed its FY2024 guidance, expecting identical sales growth without fuel of 0.25% to 1.75%, adjusted FIFO operating profit of $4.6 to $4.8 billion, and adjusted net earnings per diluted share of $4.30 to $4.50.

While the grocer did not offer an update on its proposed merger with Albertsons Cos., it did recently address concerns that arose during a Health Care Market Oversight (HCMO) Review Board meeting on the merger and divestiture plan with C&S LLC, after the community review board voted to recommend that the Oregon Health Authority (OHA) reject the Kroger-Albertsons merger.

“Fred Meyer and Safeway play a critical role in providing necessary health care services, medicine and healthy food options across the state,” wrote Kroger Health President Colleen Lindholz in the June 12 letter to Dr. Sejal Hathi, of the OHA, in Salem. “We take great pride in having done so for 100 years, fueled by our work force of more than 13,000 associates. As the operator of these beloved banners, we have a responsibility to the communities we serve and take this, along with your concern for the health and well-being of Oregon’s citizens, very seriously.”

Added Lindholz: “We are certain that C&S’ considerable resources and regional expertise, along with the resources it will gain as part of the divestiture package, will position it to successfully operate stores and pharmacies following the merger close.”

Since it was first revealed in October 2022, the proposed merger of two of America’s biggest grocers has been beset by regulatory and legal obstacles, as well as heated opposition from many labor representatives. A hearing date of Aug. 26 has been set by Judge Adrienne Nelson of the U.S. District Court for the District of Oregon regarding the FTC’s request for a preliminary injunction against the deal. Kroger and Albertsons have also taken new steps to get the deal approved, adding 166 more stores to the list of locations to be sold off to C&S, for a total of 579, including the Haggen banner.

Cincinnati-based Kroger is No. 4 on The PG 100, Progressive Grocer’s 2024 list of the top food and consumables retailers in North America. Boise, Idaho-based Albertsons is No. 9 on The PG 100. PG also named Kroger and Albertsons among the Retailers of the Century. Keene, N.H.-based C&S is No. 18 on PG’s list.

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