Commentary

Kroger Sales Surge As Consumers Stockpile Essentials, Cook At Home

Kroger, the largest traditional supermarket chain in the U.S. with more than 2,800 stores, yesterday reported a 92% increase in digital sales during its first quarter 2020, with overall sales totaling $42 billion compared to $37 billion for the same period last year. Excluding fuel, where demand and prices dropped precipitously, that represents a gain of 19.1%.

“Demand for fresh produce, meat and soups surged in March and April, and wide-ranging stockpiling in the health crisis forced the grocer to put purchase limits on cold, flu and sanitary products, as well as beef and fresh pork at certain stores,” Reuters’ Praveen Paramasivam reports.

“Reporting on a bumper first quarter, the supermarket group said that it now expected to beat earlier forecasts, which projected a rise of more than 2.25% in same-store sales and earnings of between $2.30 and $2.40 per share this year,” Paramasivam adds.

advertisement

advertisement

Kroger says “it can no longer predict what the rest of its year will look like but it’s going to be good,” writesBloomberg’s Anne Riley Moffat for The Detroit News.

“Broadly, the chain expects to exceed the outlook shared in its April 1 business update for metrics including same-store sales, adjusted earnings and adjusted free cash flow. But Kroger is ‘not able to forecast the extent of such upside’ as the U.S. consumer continues to change behavior in the wake of the coronavirus pandemic, it said  in a statement,” Moffat adds.

“Customers remain focused on health and safety and are still stocking up, but to a lesser degree than during the shutdowns. We are also starting to see a return to some splurge in impulse buying. Customers are still cooking more at home even with the eating restrictions and identical sales so far in the second quarter are trending in the mid-teens. We do expect sales to continue to taper as the quarter progresses,” CFO Gary Millerchip said  on a call with analysts transcribed by Seeking Alpha.

“The big question surrounding Kroger is whether there will be a sales slump at some point when coronavirus fears have waned somewhat. That day might still be far off, but investors want more assurances that Kroger is doing what it can to hang onto those hard-fought gains for the grocery retail stock,” Dan Caplinger writes  for The Motley Fool.

“Stronger consumer demand has resulted in empty shelves, purchase limits and fewer promotions, forcing grocers to modify their operations. They have simplified their business to focus on their bestsellers, leaning on restaurant distributors to keep these items in stock. As stockpiling cooled, food supply has improved, industry executives said,” Jaewon Kang writes  for The Wall Street Journal.

"Kroger and other food retailers are juggling new expenses related to the virus that include higher wages and cleaning fees. They have also adjusted operating hours, secured protective gear for employees and installed plexiglass in their stores. Delivery, which is becoming a more popular mode of grocery shopping, is also less profitable than in-store shopping,” Kang continues.

“Kroger said that, so far, the company has invested more than $830 million to reward employees and protect associates, customers and communities during the coronavirus pandemic. Besides operational changes and safety measures for shoppers and employees, the investments include  the hiring of over 100,000 new associates; special premium pay and bonuses in March, April, May and June, plus comprehensive benefits including health coverage; free COVID-19 testing and emergency leave for associates; waived online grocery pickup fees and prescription delivery fees; and acceptance of SNAP/EBT benefits for low-contact pickup service nationwide, among other initiatives,” Russell Redman writes  for Supermarket News.

“Despite its size and scale, Kroger has struggled to keep up as the world of grocery shopping has transformed and Walmart, Amazon and others have raised consumers’ expectations,” writes CNBC’s Melissa Repko.

“Their risk is that if they don’t optimize their business for the incredibly digital customer-centric world we all live in they will get passed and won’t be relevant,” David Bernstein, head of retail for North America at digital consultancy Publicis Sapient, tells her.

“In recent years, Kroger has tried to play catch up. It launched a multiyear initiative to rev up the business in 2017, dubbed 'Restock Kroger.' It bought a meal kit company, Home Chef, and it struck a deal with British robotics company, Ocado, to help speed up and lower the cost of fulfilling online grocery orders,” Repko adds.

Next story loading loading..