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What Are Kroger’s Key Focus Areas for Fiscal 2017?

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Updated

Same-store sales

As noted earlier in this series, Kroger (KR) has delivered an extraordinary growth streak in same-store sales, or comps, with 50 consecutive quarters of positive growth. While talking about company’s exceptional performance in 1Q17, Rodney McMullen, Chairman and CEO of Kroger, making clear that “fifty consecutive quarters of positive identical supermarket sales growth, excluding fuel, is extraordinary.”

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However, the 2.4% growth in comps from fiscal 1Q17 has been the slowest for Kroger in the past 25 quarters, and so the management is actively working toward boosting its sales. As McMullen noted during the fiscal 1Q17 conference call, “We’ve been through all kinds of business cycles during the last 50 quarters, and we’ve demonstrated time and again that regardless of the environment, you can count on Kroger to continue executing our strategy, investing in growth and creating value for our customers and shareholders.”

Improving digital presence

Kroger has been taking a disciplined approach to digital growth. It acquired Harris Teeter and Vitacost.com in 2014 to get a quick entry into the digital space. The company’s ClickList and ExpressLane offerings are now available in 25 markets, and it has plans to expand them further. ClickList is Kroger’s click-and-collect model based on Harris Teeter’s express lane idea.

Grocery retailers are continuously trying to push their top lines by increasing online sales, following different models. While Kroger (KR) and Wal-Mart Stores (WMT) have invested in creating their own online ordering and at-home delivery systems, Whole Foods Market (WFM) and Fairway Market have opted to create partnerships with companies such as Instacart and Google Express.

Higher focus on natural and organic products

Kroger has also made a large mark in the organic and natural food space in a short time. To expand its presence in this segment even further, the company has recently announced a strategic investment in Lucky’s Market.

Lucky’s Market is a specialty grocery store chain focused on natural, organic, and locally-grown products. The company currently operates in 22 locations and follows a small-store format that resembles an indoor farmers market. Along with this approach, the stores have culinary departments that sell prepared foods. Acquiring Lucky’s Market will likely help Kroger compete with Trader Joe’s and Sprouts Farmers Market (SFM).

Investors looking for exposure to Kroger (KR) through ETFs can invest in the Guggenheim S&P 500 Equal Weight Consumer Staples ETF (RHS), which invests 2.5% of its total holdings in Kroger.

Continue to the next part for a closer look at Kroger’s guidance for fiscal 2017.

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