Key Takeaways from Kroger’s 3Q Results

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Part 2
Key Takeaways from Kroger’s 3Q Results PART 2 OF 5

Behind Kroger’s Better-Than-Expected Fiscal 3Q18 Top Line

Kroger grows sales in fiscal 3Q18

Kroger (KR) posted a 4.5% YoY (year-over-year) improvement in its fiscal 3Q18 top line when it reported results on November 30, 2017. Total sales stood at $27.7 billion, beating the analysts’ estimate by $285 billion. The supermarket chain has performed better than expected for the past five quarters.

Wal-Mart Stores (WMT), America’s largest grocery retailer and Kroger’s closest competitor in most markets, recorded a 4.2% YoY rise in sales to $123.2 billion when it reported its third quarter results on November 16. The retailing giant beat the Wall Street expectation by a wide margin of $2.2 billion.

Behind Kroger’s Better-Than-Expected Fiscal 3Q18 Top Line

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Identical store sales continue to strengthen in 3Q18

Kroger’s sales comps (comparable same-store sales) continued to improve, growing 1% in fiscal 3Q18. Driving this growth was an increase in traffic as well as a rise in basket size. The fresh department, especially produces and meat, delivered outstanding results. Natural foods continued its double-digit growth run.

Kroger’s private brands continued to show strength and accounted for 28.2% of total units sold and 25.6% of dollar sales (excluding fuel and pharmacy). Simple Truth sales improved 19% YoY during the quarter. Simple Truth is now the largest natural and organic brand (by volume) in the US.

Kroger’s digital sales also showed strong momentum and jumped 109% during the quarter, driven mainly by ClickList. Kroger plans to have over 1,000 click-and-collect locations by the end of the current fiscal year.

Home delivery

Home delivery is another area wherein Kroger is expanding. The company currently provides home delivery in more than 300 locations through partnerships with service providers like Strip, Roadie, and Uber.

Investors looking for exposure to Kroger through ETFs can choose the First Trust Consumer Staples AlphaDEX Fund (FXG), which invests 7.3% of its portfolio in KR.


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