CINCINNATI -- Kroger will look to general merchandise, seasonal products, natural foods and fuel centers to increase sales and profits, the company told shareholders at its annual meeting here.
While Kroger will stick with its 10% to 12% increase in earnings-per-share goal for this year, the supermarket giant's long-term target is 13% to 15% a year starting in fiscal 2004, according to Joseph A. Pichler, chairman and chief executive officer.
One unexpected area of success for Kroger has been sales of general and seasonal merchandise, which have expanded in variety since its merger with Fred Meyer. Outdoor furniture sales have increased more than 80% so far this year with one of the most popular items -- a three-seat porch swing -- racking up nearly 28,000 units sold, the company said.
Another important strategy is the expansion of natural-food departments.
"Natural-food sales are showing explosive growth as Americans focus on healthier lifestyles and better nutrition," Pichler said.
Plans are in the works to capitalize on this trend by adding roughly 120 natural-food departments to existing stores this year. Despite Kroger's focus on its natural-food sections, shareholders voted down a proposal from Walden Asset Management, a socially conscious investment company, to include labeling on the company's store-brand foods that would inform consumers when products contain genetically modified ingredients.
In another move to boost profits, Pichler said the company is continuing its aggressive expansion into supermarket fuel centers. In the last year, Kroger has more than doubled its number of fuel centers, and the company's goal is to go from its 283 current sites to 350 at the end of fiscal 2002.
"Gasoline is a natural addition to Kroger's one-stop-shopping strategy, adding convenience and value to our customers' shopping trips," he said.
Other strong areas of business continue to include Kroger's pharmacies and corporate-brand program. The company's private-label brands have grown to comprise a 25.8% market share of grocery-dollar sales in the East and 20.7% in the West. Pharmacy sales reached $4.5 billion last year, and Pichler said those sales continue to enjoy double-digit growth.
One point of interest -- especially to investors -- is that Kroger in May renegotiated agreements with several creditors eliminating a restriction that prevented the company from paying dividends to shareholders. Pichler, however, was quick to add, "that's not a promise folks," as the audience applauded the move.
Pichler also noted that the strategic growth plan unveiled in December is proceeding as expected. The company has already eliminated 1,400 of the 1,500 jobs slated for deletion, though many of the cuts were accomplished through attrition.
"Kroger is off to a strong start in implementing our strategic growth plan," he said. "Through the end of the first quarter, we had reduced costs by approximately $124 million."
Outside the meeting, about 20 protesters gathered on the sidewalk. Half were from the Farm Labor Organizing Committee (FLOC), hoping to convince Kroger to stop carrying Mt. Olive pickles -- a company they claim has unfair labor and wage standards. The other half were from Citizens for Responsible Zoning, a group of residents from Dublin, Ohio, who oppose the rezoning of 9.6 acres of land that Kroger owns in a residential neighborhood.
