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Kroger: What Impacted Its Q1 Sales?

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Jun. 25 2019, Published 10:28 a.m. ET

Sales in the first quarter

Kroger’s (KR) sales fell 1.2% to $37.25 billion in the first quarter, which ended on May 25. The company’s sales beat analysts’ forecast of $37.21 billion. Kroger’s top line was impacted negatively by the sale of the company’s convenience store business unit. In comparison, Kroger’s sales increased 4.0% in the first quarter of 2018.

Kroger’s identical sales, without fuel, or same-store sales grew 1.5% in the first quarter—compared to 1.9% in the first quarter of 2018. The product categories that performed well in the first quarter included beverages, pet, natural foods, and the pharmacy business. Kroger’s first-quarter same-store sales growth fell by 15 basis points due to the timing of SNAP disbursements.

Kroger’s digital sales increased 42% in the first quarter. The company’s pick-up or delivery services are available to 93% of its customers.

Kroger is expanding its private brands, which generated 3.3% sales growth in the first quarter. Within the company’s private “Our Brands” business, the organic and natural brand Simple Truth experienced double-digit growth in the first quarter.

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Walmart and Target

Kroger’s sales growth rate in the first quarter lagged Walmart (WMT) and Target (TGT). Walmart’s revenues grew 1.0% to $123.9 billion in the first quarter of fiscal 2020, which ended on April 30. Walmart’s top-line growth was driven by a 3.4% rise in US same-store sales and a 37% rise in US e-commerce sales. However, lower international sales had a negative impact on Walmart’s first-quarter revenues. Target’s revenues increased 5.0% to $17.6 billion in the first quarter. Target’s same-store sales increased 4.8%. The company’s comparable digital sales rose 42% in the first quarter.

Walmart and Target have been investing in their omnichannel and digital capabilities to fight Amazon (AMZN). Amazon intensified the competition in the grocery space by acquiring Whole Foods Market in 2017. Kroger’s business has been impacted by the price war in the grocery space.

For fiscal 2019, Kroger expects its same-store sales growth to be 2.0%–2.25%.

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