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Kroger Investments Weigh On Q2

As Kroger continues to invest in its Restock Kroger strategy, the supermarket retailer reported a surge in net earnings while net sales gained slightly.

The company posted second quarter net earnings of $508 million, or 62 cents per diluted share, versus $353 million, or 39 cents per diluted share, in the year-earlier period.

However, with one-time items excluded, particularly related to Kroger’s Ocado investment, adjusted net earnings fell to $336 million, or 41 cents per diluted share, from $353 million, or 39 cents per diluted share, in the year-prior period. Kroger topped a MarketBeat-published analyst consensus estimate by a penny.

Identical sales, excluding fuel, gained 1.6%. Net sales were $27.87 billion versus $27.6 billion in the year-before quarter. Operating profit was $549 million as compared with $684 million in the period a year previous.

In the second quarter, the company launched the direct-to-consumer Kroger Ship business in four cities in the with additional expansion underway. The initiative is part of the company’s comprehensive Restock Kroger initiative that also included, in the quarter, the launch of OptUP, a data-driven app that helps customers make more informed, healthier purchase decisions, preview of a new apparel brand, and introduction of the exclusive Bromley’ For Men shaving and grooming product line.

Rodney McMullen, Kroger chairman and CEO, said, “We are only two quarters into our three year Restock Kroger plan, and we are making solid progress. Kroger customers have more ways than ever to engage with us seamlessly through our recently-launched Kroger Ship, expanded availability of Instacart, successful ClickList offering, and selling Simple Truth in China through Alibaba’s Tmall. We feel good about our net earnings per diluted share and ID sales results in the second quarter. We expect our investments in space optimization during the first half of 2018 to become a tailwind late in the third quarter. We are on track to generate the free cash flow and incremental FIFO operating profit that we committed to in Restock Kroger for 2018 to 2020, and to deliver on our long-term vision.”