Kroger said that its private brand sales were up 10.2% in the second quarter.
Gina Acosta|Editor-in-Chief
Source: progressivegrocer.com, October 2022
Deal could create the largest supermarket chain in U.S.
The Kroger Co. is apparently in talks with the Albertsons Cos. over a possible merger, according to reports from both The Wall Street Journal and Bloomberg.
A deal could be announced as soon as this week, the Journal said.
The merger would create the largest operator of traditional supermarkets in North America.
Kroger reported annual sales of $138 billion in fiscal 2021 and operates nearly 2,800 locations in the United States, while Albertsons’ revenue was $72 billion last year, with 2,278 stores.
Koger has had a blockbuster year, keeping busy proving that its business model offers a way to thrive even in the face of a variety of challenging operating environments.
The grocery retail behemoth reported another set of impressive earnings on Sept. 9 despite historic inflation and some shoppers defecting from the traditional grocery channel to food discounters.
During a second quarter earnings call, Kroger CEO Rodney McMullen said the grocer is seeing record engagement with digital coupons, fuel rewards and private brands. McMullen said Kroger saw a record 600,000 fuel rewards redeemed and another record 750 million downloads of digital coupons during Q2, representing about $1 billion in savings for shoppers.
During the period ended Aug. 13, same-store sales without fuel increased 5.8% at Kroger. Total company sales were $34.6 billion in the second quarter, compared to $31.7 billion for the same period last year. Excluding fuel, sales increased 5.2% compared to the same period last year.
Operating profit increased 13.7% to $954 million. Kroger said adjusted earnings came in at 90 cents per share, up 12.5% from the same period last year.
Looking ahead to fiscal 2023, which ends next February, Kroger said it sees full year earnings in the range of $3.95 to $4.05 per share, a 10 cent improvement from its prior guidance in June.
“Our second quarter results provide another proof point that Kroger has the right go-to-market strategy,” said Kroger CFO Gary Millerchip. “Our consistent execution of this strategy is building momentum in our business which, combined with sustained food at home trends, gives us the confidence to raise our full-year guidance.”
Kroger said that its private brand sales were up 10.2% in the second quarter, led by record growth of its namesake Kroger brand and Home Chef brand (Kroger acquired Home Chef in 2018 for $200 million).
The retailer expanded its Our Brands portfolio with the launch of a Smart Way product line, part of Kroger’s new opening price point strategy. The line brings together 16 legacy brands into a single, easy-to-find identity.
[Read more: “Going Private: How to Succeed in Store-Brand Sector“]
“As our customers face an ongoing inflationary environment, we know they are looking to stretch their dollars further than ever before,” said Stuart Aitken, Kroger’s SVP and chief merchant and marketing officer. “Smart Way is an exciting, eye-pleasing product line that will be easy for customers to find. By adding a simplified opening price point brand strategy to Our Brands portfolio, we will further cater to every customer, every time.”
The company recently announced a new Kroger Delivery Customer Fulfillment Center in the Denver Metro area, one of the fastest-growing areas in the country. Kroger also opened a new Kroger Delivery Customer Fulfillment Center in Romulus, Michigan, supporting customers in several geographies, including Michigan, Northern Ohio and Indiana. And it expanded the Kroger Delivery network by opening seven new spoke facilities, which serve as last-mile cross-dock locations, including Louisville, Nashville, and Chicago in existing geographies, as well as Austin, Birmingham, Oklahoma City, and San Antonio in new geographies.
“We are applying technology and innovation to improve freshness, grow Our Brands, and create a seamless shopping experience so our customers can get what they want, when and how they want it, with zero compromise on quality, selection and affordability,” McMullen said. “We will continue to focus on providing affordable, fresh food to our customers, investing in wages and the associate experience, and creating zero hunger, zero waste communities because when we do those things well, we deliver attractive and sustainable shareholder returns.”
In July, Albertsons, reported strong first quarter fiscal 2022 results for the period ending June 18. The retailer saw a 6.8% increase in identical sales and a 28% increase in digital sales compared to the first quarter of fiscal 2021, as well as net income of $484 million and adjusted net income of $582 million.
Net sales and other revenue was $23.3 billion for the reporting period, up from $21.3 billion during the 16 weeks ended June 19, 2021. The company’s 6.8% increase in identical sales and overall higher fuel sales helped account for the increase. Adjusted EBITDA for the quarter was $1,420 million, equivalent to 6.1% of net sales and other revenue.
“In the first quarter, our teams continued to deliver strong operating and financial performance across all key metrics, and we continued to gain market share,” said Vivek Sankaran, Albertsons CEO. “As we look forward to the balance of the year, while we are thoughtful about the macro environment and the possible implications on consumer behavior, our teams have consistently demonstrated their ability to adapt to a changing back drop in real time.
“This puts us in a strong position to continue to execute against our Customers for Life strategy, including more deeply engaging our customers both digitally and in-store and delivering against our productivity agenda,” Sankaran continued. “We are so proud of the resilience, agility and passion of our teams and their ongoing service to our customers and communities.”
Earlier this year, Albertsons launched a review of potential strategic alternatives to enhance its growth and stockholder value. According to its fiscal report, a third-party review into the value of its real estate portfolio shows the total value of company-owned and ground-leased properties has increased about $2.5 billion to $13.7 billion, up from $11.2 billion in 2019.
The fiscal report further states that, “The board has not set a timetable for the conclusion of the Strategic Alternatives Review, nor has it made any decisions related to any further actions or potential strategic alternatives at this time. There can be no assurance that the Strategic Alternatives Review will result in any transaction or other strategic change or outcome.”
Kroger is No. 4 on The PG 100, Progressive Grocer’s 2022 list of the top food and consumables retailers in North America, while Boise, Idaho-based Albertsons is No. 9.
