Kroger Q2 Gains Traction

Kroger gained some traction in the second quarter with its transformation efforts, with identical stores sales helping to drive adjusted earnings higher.

Company net earnings were $297 million, or 37 cents per diluted share versus $508 million or 62 cents per diluted share, in the year-previous period. Adjusted to exclude one-time benefits and charges, company net earnings were $357 million, or 44 cents per diluted share, as compared to $336 million, or 41 cents per diluted share, in the quarter a year before.

The company topped a MarketBeat-published analyst consensus estimate that called for second quarter earnings per adjusted diluted share of 41 cents.

Identical sales, excluding fuel, advanced 2.2% in the quarter year over year, Kroger stated, adding that digital sales increased by 31%.

The company posted second quarter sales of $28.17 billion versus $28.01 billion in the year-prior period. Operating profit was $559 million versus $549 million in the fiscal year earlier.

Kroger pointed out that it enjoyed an Our Brands sales gain of 3.1% in the quarter from the period a year previous as the company launched 203 new items under the private label initiative. In addition, Kroger expanded its store pickup program to 1,780 locations and its delivery program to 2,225 locations. Kroger also selected its first agency of record, DDB New York, as the company moves to establish a refreshed, stronger brand identity to drive store trips and traffic.

Kroger chairman and CEO Rodney McMullen pointed to the company’s strategic revamp as critical to understanding how operations have been evolving.

“The Restock Kroger framework is designed to reposition our core business by 2020 while continuing to deliver for shareholders,” he said. “We are pleased with the improvement of trends in our supermarket business in the second quarter. Guided by our customer obsession, Kroger delivered our best identical sales, without fuel, result since the launch of our transformation plan. FIFO gross margin, without fuel and pharmacy, was stable in our supermarket business. Gross margin headwinds in pharmacy were offset by strong fuel performance during the quarter. We continue to reduce costs and are on track to deliver $100 million in incremental operating profit through alternative profit stream growth. We delivered strong free cash flow and are now within our targeted net total debt to adjusted EBITDA range. Kroger is laser-focused on executing against our 2019 plans and realizing our vision of serving America through food inspiration and uplift.”