Kroger to introduce premium import brand

Kroger is introducing a new private brand of premium imported products — to be known as HemisFares­ — described by CEO Rodney McMullen as “a guided tour of the best tastes on Earth.”

Speaking in a conference call with analysts Friday, McMullen said the HemisFares line, available later this month at Kroger-owned stores, would include directly imported items with particular appeal to adventurous “foodies” and millennial shoppers.

“We find customers are increasingly becoming foodies. And it's really trying to figure out how do you find great products that will satisfy that foodie experience they want in a way that is actually a very affordable price,” McMullen said. “And if you look at the quality of this product, if you would go to a restaurant and eat something of this quality, it would cost four or five times as much as what it costs with us."

A Kroger spokesman told SN Friday the company would provide additional details about the line in coming weeks including the number of items. 

“The most exciting part,” McMullen said, “is that no one else has a brand like this.”

McMullen mentioned the new line while reviewing financial results for the fiscal second quarter, a period during which the Cincinnati retailer exceeded Wall Street expectations for comps sales and profits, while revenues climbed by 0.9% amid rapid deflation in fuel.

For the period, which ended Aug. 15, Kroger posted sales of $25.5 billion, with non-fuel comparable store sales improving by 5.3%. Analysts had expected comps of 4.6%. Net earnings totaled $433 million, an increase of 23.7% and earnings per share of 44 cents beat analyst estimates of 39 cents.

CFO Mike Schlotman said comps grew as a result of tonnage growth and an increase in the number of households shopping at Kroger — a trend he said dates to price investments made late last year that are continuing to build sales at Kroger. The company grew loyal households at an even faster rate, he added, and saw particularly strong sales performance in meat, deli and pharmacy, and double-digit growth of natural foods.

“If you look at our current ID sales trend … and take away the relatively benign inflationary environment today, it's actually as strong a real growth as we've had in quite some time, going all the way back to three or four years, actually four or five years,” Schlotman said. “You really don't see a trend as strong as we have today when you look at it on an inflation-adjusted basis. Our tonnage growth is quite strong. And from our standpoint, as long as we continue to have the tonnage growth in many of the departments that we have, we'll be just fine because that's the ultimate demonstration of the strength of your businesses: how many items are the customers buying on a weekly and monthly basis?”

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Corporate brands represented approximately 26.4% of total units sold, and 25.1% of sales dollars, excluding fuel and pharmacy.

The results prompted Kroger to increase its full-year guidance for both same-store sales and earnings per-share. Kroger now expects non-fuel comp growth in the range of 4% to 5%, from an earlier guidance of 3.5% to 4.5%. Earnings per share is now expected in the range of $1.92 to $1.98 for the year, vs. previous calls for $1.90 to $1.95.