Kroger Digital, Store Capabilities Deliver Big Q1 Gains

Coronavirus-related circumstances and the capabilities the company has developed to serve customers in new ways contributed to big gains The Kroger Co. made in the first quarter, the company asserted.

Kroger posted company net earnings of $1.21 billion, or $1.52 per diluted share, in the quarter versus $772 million, or 95 cents per diluted share, in the year-prior period.

Adjusted for one-time events, the company stated, earnings were $972 million, or $1.22 per diluted share, versus $586 million, or 72 cents per diluted share, in the quarter a year earlier.

Kroger beat a Zacks Investment Research analyst consensus estimate of $1.12 per adjusted diluted share for the quarter.

Identical store sales advanced 19% in the period year over year, Kroger reported. Sales were $41.55 billion compared to $37.25 billion in the year-previous quarter, as digital sales grew 92%, the company indicated. Operating profit was $1.33 billion versus $901 million in the period a year before. Adjusted FIFO operating profit was $1.45 billion versus $957 million in the quarter a year past, Kroger noted.

In a conference call, Kroger chairman and CEO Rodney McMullen said the company’s digital and pickup services stood it in good stead in the COVID-19 crisis. The company expanded contact-free payment solutions and moved to support the higher volume of pickup orders by hiring additional e-commerce employees, adding more pickup slots and increasing the frequency of customer communications. The company initiated the test of a grocery pickup-only location in Cincinnati. The several moves and other adaptations contributed to the 92% digital sales growth in the quarter, he said, and triple digit gains in April and May.

Kroger will continue to invest in digital operations including the development of automated fulfillment centers with partner Ocado. In early June, McMullen pointed out, Kroger identified three regions, the Great Lakes, the Pacific Northwest and the West, where it will begin adding Ocado-designed automated fulfillment centers, or sheds.

“Under Restock Kroger, we have made significant investments over the last several years to establish a seamless digital ecosystem, strengthen our brands and our personalization capabilities, and to enhance product freshness and quality,” McMullen said in announcing the first quarter results. “These investments helped Kroger deliver improved results in 2019, a strong start to the quarter, and very much came to the forefront as we provided our customers with the fresh food and essentials they have needed during the pandemic.”