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Analyzing Kroger’s Fiscal 4Q17 Sales Performance

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Mar. 7 2017, Updated 6:43 p.m. ET

Kroger’s top line exceeded expectations in 4Q17

Kroger (KR), America’s largest supermarket, reported an improvement of 5.5% in total sales to $27.6 billion during fiscal 4Q17, which ended on January 28, 2017. The company did better than Wall Street expectations and its management’s guidance.

For fiscal 2017, Kroger’s total sales increased 5% to $115.3 billion. While its top line gained from the company’s recent mergers with Modern Healthcare and Roundy’s, it was negatively impacted by volatile fuel prices. Excluding fuel, its total sales were 6.7% higher.

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The company’s management said that Kroger continued to gain market share for the 12th consecutive year. “Kroger’s overall market share with the products we sell in the markets where we operate grew approximately 20 basis points in 2016 with 14 of 22 markets up too flat and six markets down,” said Mike Schlotman, Kroger’s executive vice president and chief financial officer.

Organic and naturals continue to steal the show

Organic and natural food sales continued to show momentum throughout the year, hitting nearly $16 billion in sales in fiscal 2017. In comparison, pure-play organic and natural food retailers Whole Foods Market (WFM) and Sprouts Farmers Market (SFM) posted trailing 12-month sales of $15.8 billion and $4 billion, respectively.

What was the downside in Kroger’s fiscal 4Q17 results?

Like other food retailers, Kroger (KR) has been battling deflation for more than a year. However, the company stayed strong and managed positive identical-store sales (excluding fuel) for 52 consecutive quarters.

Fiscal 4Q17 marked the end of this trend as Kroger reported a 0.7% decline in comps (excluding fuel). Please read the next section to learn about the company’s deteriorating comp performance.

Investors looking for exposure in Kroger through ETFs can choose to invest in the First Trust Consumer Staples AlphaDEX ETF (FXG). KR comprises ~2.2% of FXG.

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