Supercharged Sales Growth at Kroger
Kroger’s wide-ranging investments in physical and digital operations helped the company achieve significant earnings growth in the second quarter, with an astounding 127% increase in e-commerce sales.
The Kroger Co. said same-store sales without fuel grew 14.6% for the second quarter ended Aug. 15. The sales boost from pandemic-related grocery buying did decelerate in Q2 from the first quarter, which produced 19% growth, and from March, when comps were 30%. But the double-digit sales growth at Kroger is still stunning considering that the company early in the year had expected a 2.5% comp increase.
According to Placer.ai, recent foot traffic data show weekly year-over-year visit growth of 2.5% at Kroger since July 27. And Kroger's customers are also spending 5.3% more on a year-over-year basis.
"Each day I'm inspired by the work our incredible associates do to bring to life our purpose, to Feed the Human Spirit,” said CEO Rodney McMullen. “Our top priority is to provide a safe environment for associates and customers and as the pandemic continues, we will continue to rise to meet the challenge. Customers are at the center of everything we do and, as a result, we are growing market share.”
Kroger’s 127% increase in e-commerce sales also translated into profitability for the company in the period. Total company sales were $30.5 billion in the second quarter, compared to $28.2 billion for the same period last year. Excluding fuel, sales grew 13.9%. Gross margin was 22.8% of sales for the second quarter.
Kroger has been pouring hundreds of millions of dollars into digital efforts such as delivery, pickup, a third-party seller marketplace on its Kroger Ship website, and lots of fulfillment centers built with British online grocery delivery company Ocado. Kroger has also been at the forefront of contactless and digitally enabled COVID-19 testing since early on in the pandemic.
“Kroger's strong digital business is a key contributor to this growth, as the investments made to expand our digital ecosystem are resonating with customers. Our results continue to show that Kroger is a trusted brand and our customers choose to shop with us because they value the product quality and freshness, convenience, and digital offerings that we provide,” McMullen said.
During the quarter, Kroger repurchased $211 million shares under its $1 billion board authorization announced on Nov. 5, 2019. On Sept. 11, the 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 for the company.
As a result of the company’s strong performance in the first half and the expectation of sustained trends in food-at-home consumption, Kroger updated its full year 2020 guidance.
“There are still many uncertainties and, as a result, we are providing a wider guidance range. For the full year 2020, we expect total identical sales without fuel to exceed 13% and we expect to achieve adjusted EPS growth of approximately 45% to 50%,” said CFO Gary Millerchip.
Cincinnati-based Kroger employs nearly half a million associates who serve 9 million-plus customers daily through a seamless digital shopping experience and 2,757 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 retailers in the United States.