Kroger’s focus on fresh and digital growth pays off in Q3

The Kroger Co.’s total company sales were $31.9 billion in the 2021 third quarter ending Nov. 6, compared to $29.7 billion for the same period last year, according to the company’s earnings report released on Thursday. Excluding fuel, sales increased 2.9% compared to the same period last year.

Identical sales without fuel increased 3.1% year over year to $27.7 billion up from $26.8 billion, with a two-year stacked increase of 14.0%. Year-to-date in fiscal 2021, identical sales are down just 1.0% from 2020, at $91.9 billion.

Significantly, Kroger’s digital sales grew 103% on a two-year stack.

"Kroger's strategy to lead with fresh and accelerate with digital continues to connect with our customers,” said Rodney McMullen, CEO of Kroger, in a statement. “Our agility, and the commitment from our amazing associates, is allowing us to navigate current labor and supply chain conditions and provide the freshest food at affordable prices across our store and digital ecosystem.

"Our focus on execution, combined with our continued discipline in balancing investments in our associates and customers with exceptional cost management, and growth in our alternative profit business allowed us to exceed internal expectations and deliver strong sales and earnings growth.”

Related:Kroger’s Home Chef brand hits $1 billion in sales

He continued, "Across all aspects of our business, we are innovating and executing with speed against the key initiatives that are transforming our business. Kroger is in a position of strength. We are committed to delivering for our associates, customers, and communities, and we remain confident in our ability to deliver total shareholder returns of 8% to 11% over time."

'Across all aspects of our business, we are innovating and executing with speed against the key initiatives that are transforming our business,' said Kroger CEO Rodney McMullen.

The Cincinnati-based grocer, the nation’s largest supermarket chain with more than 2,700 stores, is seeing rewards from its dual-pronged focus on fresh and digital, as well as its continued expansion in its Our Brands lineup, which launched 216 new items during the quarter — up from 142 new products in the second quarter — with plans to launch several new products focused on the holiday season like Private Selection Holiday Trail Mix and Simple Truth Cranberry Pistachio Bread. Kroger also announced that its Home Chef brand has become its newest Our Brands billion-dollar brand based on annualized sales this fiscal year.

On the digital front, Kroger in the third quarter launched Kroger Delivery Now nationwide with Instacart to provide 30-minute delivery, enabled by a virtual convenience store shopping experience; introduced Boost by Kroger Plus, an annual membership program that provides customers free delivery and additional fuel points on purchases in four divisions; and announced plans for five new customer fulfillment centers powered by the Ocado Group, including expansions in California and Florida and entrance for the first time into the Northeast region; announced a collaboration with Bed Bath & Beyond and buybuy Baby on a national e-commerce experience via Kroger.com and a small-scale physical store pilot to expand home and baby product offerings.

Related:Kroger to enter Northeast with Ocado robotic warehouse

In addition, its Kroger Precision Marketing division launched a new programmatic advertising marketplace allowing agencies and brands to reach consumers by applying Kroger customer data to campaigns within their preferred ad-buying platform.

Looking ahead, Kroger lifted its EPS and identical-sales projection for fiscal 2021.

"Driven by the momentum in our third-quarter results and sustained food-at-home trends, we are raising our full-year guidance,” said CFO Gary Millerchip in a statement. “We now expect our two-year identical sales stack to be in the range of 13.7% to 13.9%. We expect our adjusted net earnings per diluted share to be in the range of $3.40 to $3.50.  

"Kroger is executing against its key financial and operational initiatives and continues to invest in strategic priorities that will drive attractive and sustainable total shareholder returns. We believe our business is emerging stronger through the pandemic and is well positioned to grow beyond 2021."