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Kroger reports strong Q3, growth in fresh and private label

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Third Quarter Highlights

Identical Sales without fuel increased 6.9%
Operating Profit of $841 million; Adjusted FIFO Operating Profit of $1,094 million
EPS of $0.55; Adjusted EPS of $0.88
Company is executing its go-to-market strategy to deliver value for customers
Our Brands identical sales increased 10.4%
Digital sales grew 10%
Fresh Produce Initiative accelerated with a total of 1,252 stores certified, driving higher identical sales

CINCINNATI, Dec. 1, 2022 /PRNewswire/ — The Kroger Co. BB #:100073 today reported its third quarter 2022 results and will update investors on how Leading with Fresh and Accelerating with Digital continues to position Kroger for long-term sustainable growth.

Comments from Chairman and CEO Rodney McMullen

“Kroger achieved strong results in the third quarter as we continue to execute our Leading with Fresh and Accelerating with Digital strategy. Our associates are doing an outstanding job delivering a full, fresh and friendly experience across our seamless store and digital ecosystem.

Kroger’s value proposition, which includes providing great quality, fresh products at affordable prices, data-driven promotions, trusted Our Brands products and an industry-leading fuel rewards program, is resonating with shoppers and driving increased customer loyalty.

This quarter demonstrates the strength of our approach to growing our business. By delivering for our customers, investing in our associates and supporting our communities, we are creating attractive and sustainable total returns for our shareholders.”

Third Quarter Financial Results

Total company sales were $34.2 billion in the third quarter, compared to $31.9 billion for the same period last year. Excluding fuel, sales increased 6.4% compared to the same period last year.

Gross margin was 21.4% of sales for the third quarter. The FIFO gross margin rate, excluding fuel, decreased 5 basis points compared to the same period last year. This result reflected Kroger’s ability to effectively manage higher product cost inflation and shrink through strong sourcing practices, while also helping customers manage their budgets and keeping prices competitive.

The LIFO charge for the quarter was $152 million, compared to a LIFO charge of $93 million for the same period last year, driven by higher product cost inflation primarily in grocery.

The Operating, General & Administrative rate decreased 3 basis points, excluding fuel and adjustment items, compared to the same period last year. The decrease in OG&A rate was driven by sales leverage and the continued execution of cost savings initiatives partially offset by investments in associates.

Rent and depreciation as a rate to sales, excluding fuel, decreased 9 basis points due to sales leverage.

Third Quarter 2022 Highlights

Leading with Fresh

-Launched Our Brands Innovation Summit, a program designed to uncover new and exciting private brand items that highlight market trends
-Introduced 147 new Our Brands items, including products to enhance the holiday season
-Expanded Alternative Farming offerings to 792 total stores connecting more communities to locally sourced fresh and sustainable products
-Announced the top 2022 fall food trends, predicting customer behavior and popular items for the upcoming season
-Celebrated four awards earned by Murray’s Cheese varieties at the World Cheese Awards

Accelerating with Digital

-Increased delivery sales by 34% over last year driven by Kroger Boost and Customer Fulfillment Centers
-Launched Kroger floral and sushi delivery in collaboration with DoorDash in more than 1,000 locations
-Expanded Kroger Precision Marketing’s programmatic advertising marketplace to include Connected TV and video capabilities
-Introduced the Rachael Ray Home Chef meal kit, which guides customers through an easy-to-follow recipe created by the chef

About Kroger

At The Kroger Co. (NYSE: KR), we are dedicated to our Purpose: to Feed the Human Spirit™. We are, across our family of companies nearly half a million associates who serve over eleven million customers daily through a seamless digital shopping experience and retail food stores under a variety of banner names, serving America through food inspiration and uplift, and creating #ZeroHungerZeroWaste communities by 2025. To learn more about us, visit our newsroom and investor relations site.

Kroger’s third quarter 2022 ended on November 5, 2022.

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