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Kroger’s Management Focuses on the Bigger Picture

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Management’s comment on second-quarter performance

Although Kroger’s (KR) 2Q17 results indicate a huge slowdown, the company still managed to register an improvement in its market share.

During its 2Q17 earnings call, Kroger’s management tried to emphasize the company’s long-term growth prospects, focusing on the bigger picture and diverting attention from the current slowdown. Rodney McMullen, chair and CEO (chief executive officer) of Kroger, said the “execution of our Customer 1st Strategy in a deflationary environment helped deliver growth in identical store sales, units and market share. We are focused on long-term performance over a three-to-five year horizon. We have the right strategy, the right people, and the financial flexibility to execute our strategy, which allows us to continue investing in our associates and our business and growing market share. By staying on our strategy, we create long-term value for our shareholders.”

If you’re looking for exposure to Kroger through ETFs, you can invest in the First Trust Consumer Staples AlphaDEX ETF (FXG). KR makes up 0.75% of FXG.

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Kroger should benefit from the right set of initiatives

Although we can’t deny the current softness in numbers, Kroger should benefit from its past and ongoing efforts going forward. The company has steadily improved its sales mix and product offerings, moving toward higher gross margin categories such as natural and organic foods. Once the deflationary environment is over, the company is likely to reap some benefits.

Kroger is also making continuous efforts to increase its digital presence. Its online ordering services, ClickList and Express Lane, are now active in around 400 locations. Food retailers are working hard to push their top lines through online sales using a variety of formats.

Kroger (KR) and Walmart (WMT) have created their online ordering and at-home delivery systems. Whole Foods Market (WFM) and Sprouts Farmer Market (SFM), on the other hand, have entered into partnerships with Instacart, Google Express, and Amazon Prime to deliver their online orders.

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