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12/03/2021

Kroger Our Brands, Home Chef step up for consumers facing inflation

During Q3 financial report, retailer called out Home Chef as the next store brand to hit $1 billion, said its private brands ease 1 in 4 consumers concerned about money.
Dan Ochwat
Executive Editor
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Kroger’s fresh food focus and a push in digital drove a fruitful third-quarter earnings report, delivering a 3.1% increase in same-store sales and a 14% increase on a two-year stack basis. Digital sales leaped 103% for the quarter ending Nov. 6.

Private label played a big role in Kroger’s “Leading with Fresh” strategy, pointing to Home Chef marking the first time it hit $1 billion in annualized sales, “becoming the newest Our Brands billion dollar brand” in the portfolio.

“Our Brands offer our customers flexibility within their spending without compromise."
Rodney McMullen, CEO, Kroger, during the financial call

The private brand group launched 216 items during the quarter, supporting the holiday entertaining season with items such as  Private Selection Holiday Trail Mix and Simple Truth Cranberry Pistachio Bread. Kroger also released the world’s first carbon-neutral, cage-free eggs under Simple Truth, partnering with Kipster Farms, founded in The Netherlands.

Additionally, Kroger expanded the launch of its “End-to-End Fresh” program to more than 50 additional stores. The importance of Kroger’s private brands can be seen in that one in four consumers are not confident in their finances this year, and 82% of consumers are feeling the impact of inflation, according to polling by the grocer. 

“Our Brands offer our customers flexibility within their spending without compromise,” said Rodney McMullen, CEO and chairman of Kroger during the financial call.

He also said that digital personalization is helping shoppers stretch their food dollars, and pointed to big digital moves that grew the business:

  • Launched Kroger Delivery Now nationwide with Instacart to provide 30-minute delivery, enabled by first-of-its-kind virtual convenience store shopping experience;
  • Introduced Boost by Kroger Plus, an annual membership program that provides customers free delivery and additional fuel points on purchases in four divisions;
  • Shared plans for five new customer fulfillment centers powered by the Ocado Group including expansions in California and Florida and entrance for the first time into the Northeast region;
  • Announced collaboration with Bed Bath & Beyond and buybuy Baby on a national e-commerce experience via Kroger.com and a small-scale physical store pilot to expand home and baby product offerings;
  • Kroger Precision Marketing launched a new programmatic advertising marketplace   allowing agencies and brands to reach consumers by applying Kroger customer data to campaigns within their preferred ad-buying platform.

The Cincinnati-based grocery leader said it stayed nimble amid labor and supply chain conditions, too, finding it is in better stock than a year ago. “Our focus on execution, combined with our continued discipline in balancing investments in our associates and customers with exceptional cost management, and growth in our alternative profit business allowed us to exceed internal expectations and deliver strong sales and earnings growth,” said McMullen. “Across all aspects of our business, we are innovating and executing with speed against the key initiatives that are transforming our business. Kroger is in a position of strength. We are committed to delivering for our associates, customers, and communities, and we remain confident in our ability to deliver total shareholder returns of 8% to 11% over time."

Total company sales were $31.9 billion in the third quarter, compared to $29.7 billion for the same period last year. Excluding fuel, sales increased 2.9% compared to the same period last year.

Gross margin was 21.66% of sales for the third quarter. The retailer also raised its full-year guidance. "Driven by the momentum in our third quarter results and sustained food at home trends, we are raising our full-year guidance. We now expect our two-year identical sales stack to be in the range of 13.7% to 13.9%. We expect our adjusted net earnings per diluted share to be in the range of $3.40 to $3.50,” said Gary Millerchip, CFO, Kroger. “We believe our business is emerging stronger through the pandemic and is well positioned to grow beyond 2021."