Corporate Profiles - 2020 - 94

COMPANY OVERVIEW

The Kroger Co.
Digital sales grow significantly during the year
arket forces whipsawed the Kroger Co. in
2020.The Cincinnati-based retailer ended
its fiscal year 2019 in February amidst a
backdrop of volatility. Then the coronavirus (COVID-19) pandemic hit, and Kroger's business accelerated at an unprecedented pace. Today, management is seeking to sustain the gains it achieved
during a year unlike any other.
While Walmart Inc. and Target Corp. eschewed
financial guidance, citing the uncertainty of the
pandemic, Kroger's leadership set a marker. In
mid-September, citing current consumer trends,
the retailer raised its guidance for the fiscal year.
"The COVID-19 pandemic has changed the outlook for food retail, and we continue to monitor,
evaluate and adjust our plans to address the impact
to our business," said Gary Millerchip, chief financial
officer, during a Sept. 11 conference call to discuss
second-quarter results. "While there are clearly still
many unknowns ... we now have greater clarity in
many areas of our business and the drivers of food
to home consumption."
Management said sales without fuel are expected to exceed 13% when compared to the previous
year, and adjusted earnings per share are expected
to grow between 45% to 50%.
"In the second half of 2020, we expect identical
sales, excluding fuel, to continue at elevated levels,

although tapering from the level we've experienced
so far this year," Mr. Millerchip said. "Our guidance
contemplates continued investments in the customer and ongoing COVID-19-related costs to
protect the safety of our customers and associates,
balanced with continued execution of cost-saving
initiatives and growth in alternative profits."
Kroger's net income for the first six months of
fiscal 2020 was $2 billion, equal to $2.58 per
share on the common stock, and an increase over
the previous year when the company earned $1
billion, or $1.32 per share.
Sales for the first half of the fiscal year were $72
billion, up from the $65 billion in sales generated
in fiscal 2019.
"We continue to see a slow return to normal
from the shutdown period, resulting in fewer
customer visits but increased basket size," said
William Rodney McMullen, chairman and chief
executive officer. "Customers across the country
are still staying home and cooking at home that

is now part of their new routine. This makes our
leadership position in fresh an even more important sales driver for Kroger."
Mr. Millerchip said digital sales grew 127%
during the first half of fiscal 2020 and contributed
4.4% of identical sales without fuel. The growth
was seen in a variety of channels, including pickup
and delivery.
"Even before the pandemic, our digital business
had become a tailwind," Mr. McMullen said. "The
pandemic certainly has accelerated customer preference for seamless offerings.
"Our customers are increasingly turning to our
e-commerce solutions for their grocery and household essential needs. Many of our customers are ordering groceries online for the first time as a result
of COVID-19, and the majority of them tell us they
plan to continue to do so in the future."
Kroger's relationship with Ocado, the online
retailer and technology vendor, continued to
develop during the year. The two companies announced plans for three more distribution centers in the West, Pacific Northwest and Great
Lakes regions. Kroger did not identify specific
locations, but they will be in addition to six
other sites now in development in Monroe, Ohio;
Groveland, Fla.; Fredericksburg, Md.; Atlanta;
Dallas; and Pleasant Prairie, Wis. CP

Chief executive officer -
William Rodney McMullen

Kroger net earnings

Kroger net sales

(fiscal years ended in January)

Kroger share price
$40

$1,907

$3,110

$1,659

in millions

$35
$30
$123,280

$121,852

$122,286

2018

2019

2020

$25
$20

2018

94 \ October 2020

2019

2020

Oct.
2019

Dec.

Milling & Baking News * Food Business News * Baking & Snack * Meat+Poultry * Pet Food Processing

Feb.
2020

Apr.

June

Aug.

Corporate Profiles

Corporate Profiles - 2020

Table of Contents for the Digital Edition of Corporate Profiles - 2020