uploads///Same Store Sales Growth

Kroger’s Top Line: Lower Prices, Customer Service Boost Sales

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Kroger’s sales growth

Competitive product prices, a customer-friendly approach, and the increased use of technology have enabled Kroger (KR) to attain a higher market share and a robust top line performance. The company’s sales have grown by a compounded annual growth rate (or CAGR) of 6.8% during the last ten years and a CAGR of 7.2% during the last five years.

Kroger’s performance was better than that of SuperValu Inc. (SVU), which saw a decline in sales and a five-year CAGR of -15%. Kroger also beat Walmart Stores Inc. (WMT), whose sales saw a modest increase, with a five-year CAGR of 3.5%. Whole Foods Market (WFM) registered solid growth with a five-year CAGR 12.1%, and Costco Wholesale Corporation’s (COST) revenue growth was also impressive, with a five-year CAGR 9.5%.

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Same-store sales

Identical store sales present a key measure of health in the retail food industry and a key performance target for the company’s long-term growth strategy. Total supermarket sales and identical supermarket sales are differentiated by the changes in supermarket square footage.

Kroger has been consistent in its same-store sales growth and has achieved positive identical store sales growth for 47 consecutive quarters. The company’s cost-disciplined approach has enabled it to use its savings in maintaining low prices and gaining customer loyalty. Its focus on customer communication and expansion of its digital platform have helped it to achieve high volumes.

The chart above depicts same-store sales trends (excluding fuel sales) for Kroger (KR) and its peers during the last seven years. Walmart (WMT), the biggest retailer, has consistently had a same-store sales growth lower than Kroger. Costco (COST) has achieved a higher same-store sales growth than Kroger, post-recession.

Whole Foods (WFM) has seen a decline in its same-store sales after peaking in 2011. The Fresh Market’s (TFM) same-store sales recently turned negative.

ETF exposure

Kroger and its peers Wal-Mart (WMT), Whole Foods (WFM), and Sprouts Farmers Market (SFM) are included in the portfolio holdings of the SPDR S&P Retail ETF (XRT) and account for ~4.1% of the index weight.

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