Shares of the retailer Kroger (KR, Financial) have surged 56% since the beginning of this year. The retailer has shown significant improvement in its performance and has gained much due to its Customer First strategy. Also, its competitive prices attract more customer attention as the budget restrained people find it better to shop at Kroger stores than any other big box retailer.
Kroger did it once again when it registered a blockbuster quarter recently. The numbers were ahead of the Street's estimates, leading to a stock price surge of 3%.
By the numbers
Revenue jumped 11% to $25 billion, as compared to last year's quarter. This was in-line with the analysts' estimates. Sales were driven by higher demand for its products and higher customer traffic at its stores. Thus, same store sales, sales at the existing stores, rose 5.6% during the quarter. This was much higher than that of the last two quarters. The same store sales metric was 4.6% and 4.8% in the first and the second quarter, respectively.
Furthermore, Kroger's comp sales were even better than that of its industry peers. For instance, Whole Foods Market (WFM, Financial) registered same-store sales growth of 3.1% in the latest quarter. Whole Foods Market is a retailer of premium organic and natural food and thus provides competition to Kroger in the natural food category. However, Kroger's lower prices for similar products attract more people. The Simple Truth line of products is one of the greatest strengths of Kroger since rising health consciousness of people has resulted in higher demand.
The bottom line of the company was also impressive. Earnings rose 21% to $0.69 per share, over the prior year. This was higher than the analysts' estimate of $0.61 per share. Lower fuel prices resulted in expansion of margins as well as a higher bottom line.
Some strengths to consider
Kroger's focus on Customer First strategy is one of the biggest strengths of the company. The retailer concentrates on making customers happy in whatever way possible. Therefore, it undertook measures such as shortening the waiting time at the checkout lanes, introducing customer loyalty program and so on. In fact, customer loyalty program was very successful since it provided customized discounts to loyal customers, depending on their past purchases made at Kroger stores.
Moreover, the acquisition of Harris Teeter Supermarkets in January and that of the online retailer Vitacost.com in August were some of the positive factors which contributed to the top line. Harris Teeter buyout added 200 retail stores to Kroger's network. Vitacost.com expanded the growing online business of the company. Thus, both the acquisitions were important in growing the business.
Furthermore, the retailer raised its guidance for the year. It now expects earnings per share to be in the range of $3.32 per share to $3.36 per share from an earlier range of $3.22 per share to $3.28 per share. The company expects to make more money due to the addition of two new businesses.
To end up with
Kroger is an exemplary performer in its space. Its focus on expanding its business through acquisitions and many other means look interesting. It has broadened its portfolio of products by concentrating on the natural and organic food, which is now witnessing great demand. Also, it is repurchasing shares to make investors happy. Overall, this company is one of those which serves the interests of all the parties, including customers and investors. This retailer should be treasured for the long run.
