Dive Brief:
- Kroger recorded a 0.8% decrease in comparable-store sales excluding fuel during the fourth fiscal quarter of 2023, but the company’s overall sales, operating profit and earnings per share all increased significantly year over year during the period, the grocer reported Thursday.
- The company generated $37 billion in sales in Q4, up more than 6% from the same period a year ago. Operating profit rose almost 45%, to $1.2 billion.
- Kroger remains committed to overcoming the federal government’s opposition to its planned merger with Albertsons, but sees avenues for growth even if it cannot complete the transaction, Chairman and CEO Rodney McMullen said during an earnings call.
Dive Insight:
Kroger was disappointed but not surprised by the Federal Trade Commission’s decision to seek a court order to halt the merger, McMullen said.
“The character of a company is clear in its actions regardless of what others claim. Kroger keeps its commitments, and we’re happy to share this with whomever is willing to talk with us,” McMullen said, adding that the company is “committed to defending the merger in litigation because we believe this is the best outcome for America’s families.”
Kroger expects a hearing to determine what comes next in its fight with the FTC, which will likely begin no sooner than mid-summer, McMullen added.
McMullen said Kroger believes it is well situated to expand its business whether or not it prevails in its bid to join forces with Albertsons, noting that the company has the cash flow to fund growth. “[W]e’re finding good growth opportunities in certain markets where we have a strong [return on invested capital] and there’s good population growth, and it’s something that we feel comfortable doing with or without the merger,” he said.
Kroger turned in comparable-store sales growth of 0.9% for all of 2023. Sales for the year were up by just over 1% compared with the previous 12 months, to $150 billion.
Kroger projected that its comparable-store sales growth for the current year will fall between 0.25% and 1.75%. The company expects the metric to improve as 2024 unfolds and come in at its highest level for the year in the fourth quarter, interim CFO Todd Foley said during the earnings call. Foley took over from former CFO Gary Millerchip, who left the grocer last month and is set to become Costco’s finance chief next week.
Kroger’s digital sales grew 12% during the past year and accounted for over $12 billion in sales, according to McMullen. Kroger saw an 18% boost in digitally engaged households during Q4 which ended Feb. 3, he said.
Foley said Kroger is testing concepts including customer pickup lockers, drive-thru lanes and AI-enabled store routing systems as it looks to improve its digital margins, describing those efforts as a “significant opportunity to improve total company operating results.
