People are adopting healthier lifestyles, which has given birth to a variety of organic food offerings. Retailers, who provide natural food, have been able to take advantage of this growing trend. One of the leading providers of organic food is Whole Foods Market (WFM) which provides premium natural food to customers. However, with the entry of Kroger (KR) in this segment, Whole Foods has lost its market share.
Kroger is the largest operator of traditional supermarkets and its massive size makes it easy for the retailer to provide products at a conveniently lower price. The company has been posting great results each quarter and its recently reported first quarter was not an exception. The numbers were much ahead of estimates, forcing its share price to move higher.
The amazing numbers
Driven by same store sales growth of 4.6%, revenue jumped 10% to $33 billion over last year. If we exclude fuel sales, revenue increased 11.4% during the same period. Same store sales increased because of higher store traffic and transaction size as people demand more of Kroger’s products. Also, its recent acquisition of Harris Teeter Supermarkets added to its top line.
Its earnings too jumped to $1.09 per share from $0.92 per share in the previous year’s quarter. This highlights that the company has also been able to manage costs despite input cost inflation.
One of the key strategies of growth has been its Customer 1st strategy which focuses on keeping customers’ interests rather than anything else. It believes in making the customer’s experience better so that they come back to Kroger for all their needs. Its customer loyalty program is one of the best initiatives which provide customized discounts to customers depending on their past purchases.
Kroger’s organic food offering has been one of the strengths for the retailer since it has made huge money from this segment. The fact that its prices are lower than that of Whole Foods Market, customers remain hooked in Kroger stores. Moreover, natural food has become quite important for customers.
Further, the Cincinnati-based grocer has been trying to strengthen its e-commerce business through various efforts. It acquired Harris Teeter Supermarkets recently to add more than 200 stores to its network as well as take advantage of its online ordering and store pickup facility.
Kroger has also recently acquired You Technology, provider of digital-coupon marketing. This purchase was made to strengthen its digital presence and bridge the gap between physical and digital operations. Hence, the company is on a constant mission to build its e-commerce operations.
Moreover, the supermarket retailer also provides private label brands which are doing well and provide higher margins. It has also come out with new packaging and design of its products in order to attract people.
Future looks bright
Hence, these initiatives have been making the company grow stronger with each passing day. It has been performing well and has raised its outlook for the year to a range of $3.19 and $3.27 per share from a range of $3.14 and $3.25 per share. Also, it now expects sales to rise between 12% and 15% and same store sales to grow by 3% to 4% over last year. Therefore, Kroger is expected to continue with its growth momentum and bring delight to its investors as well as its customers.