Supermarket giant Kroger’s stock took a hit this morning after the retailer posted mixed second-quarter results before. While the retailer delivered better-than-expected earnings, its top line fell short of expectations. Private brand highlights for the quarter included: the launch of their new apparel private brand, Dip. The introduction of the new men’s shaving private brand Bromley’s For Men; and the debut of Simple Truth in China on Alibaba’s Tmall.
Kroger reported net earnings of $508 million, in the second quarter of 2018, which ended on August 18. Kroger’s second-quarter adjusted net earnings were $336 million. The 2018 second quarter adjustment items relate primarily to the change in the market value of Kroger’s investment in Ocado securities. Net earnings for the second quarter 2017 were $353 million. Kroger reported identical sales, without fuel, of 1.6% for the second quarter of 2018.
For the first half of 2018, Kroger’s adjusted net earnings per diluted share result was slightly ahead of the company’s internal expectations due to the solid early execution of Restock Kroger, including process changes that led to sustainable cost controls and higher-margin alternative revenue streams. This performance will allow Kroger to continue making incremental investments while delivering on its guidance range for the year.
Chairman and CEO Rodney McMullen spoke on Q2, 2018.
“We are only two quarters into our three-year Restock Kroger plan, and we are making solid progress. Kroger customers have more ways than ever to engage with us seamlessly through our recently-launched Kroger Ship, expanded availability of Instacart, successful ClickList offering, and selling Simple Truth in China through Alibaba’s Tmall.”
“We feel good about our net earnings per diluted share and ID sales results in the second quarter. We expect our investments in space optimization during the first half of 2018 to become a tailwind late in the third quarter.
“We are on track to generate the free cash flow and incremental FIFO operating profit that we committed to in Restock Kroger for 2018-2020, and to deliver on our long-term vision to serve America through food inspiration and uplift.”
Second Quarter 2018 Highlights
Redefine the Grocery Customer Experience
- Launched Kroger Ship in four U.S. cities, with additional expansion underway
- Launched OptUP, a data-driven app that helps customers make more informed, healthier purchase decisions, with 130,000 downloads in two months and goal of 1 million downloads in one year
- Announced the new apparel brand, Dip, developed by globally-renowned fashion designer Joe Mimran
- Introduced exclusive Bromley’s For Men shaving and grooming products
- Hosted third Natural Foods Innovation Summit in partnership with 84.51°
Partner for Customer Value
- Launched Our (Private) Brands internationally, making Simple Truth products available in China on Alibaba’s Tmall Global platform
- Expanded partnership with Instacart to increase customer delivery coverage area to 75 additional markets throughout the U.S. by late October
- Seamless coverage area increased to 80% of Kroger households through curbside pickup and home delivery from store
- Piloting an on-road, fully autonomous delivery experience in Scottsdale, Arizona with Silicon Valley startup Nuro
- Exploring strategic alternatives for Turkey Hill Dairy business, including a potential sale
- Kroger Precision Marketing powered by 84.51 launched Boosted Products in searches on Kroger digital properties, which in one month alone delivered 200 million product impressions for advertisers, resulting in a very high return on marketing investment vs. the traditional industry standard