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03/05/2020

Kroger store brands have ‘best year ever’

Dan Ochwat
Executive Editor
Dan Ochwat profile picture
Kroger's Simple Truth plant-based pasta sauce, one of 39 plant-based items rolled out this year under its Our Brands.

Kroger’s store brands exceeded $23.1 billion in sales in 2019, the best year for the offerings to date.

And after reviewing a full transcript of Kroger's fourth-quarter earnings, the retailer had a lot of good to share about its Our Brands strategy. Here are the highlights:

  • Private Selection surpassed $2 billion in sales for the first time, becoming Kroger's third private brand to earn over $2 billion;
  • The Our Brands group introduced 758 new products in 2019, with 39 being plant-based store brand products;
  • Under plant-based meats, Kroger launched Emerge and in less than a month the products ranked third in the category;
  •  Simple Truth exceeded $2.5 billion to become the leading natural organic brand in the U.S.;
  • The Kroger brand earned $13.7 billion in sales, capitalizing on global and regional flavors.

Rodney McMullen, Kroger chairman and CEO, presented the results and said the company’s “Restock Kroger” initiative is what's paying off for its private brands.

Store brands exceeded $23 billion in 2019; Private Selection becomes third brand over $2 billion.

“Restock Kroger is the right strategic framework to position the company for sustainable growth in the future, continue to improve the core business, and deliver strong total shareholder return,” he said. “This transformational foundation supports our competitive moats today — Fresh, Our Brands and Personalization — as well as building a seamless ecosystem of the future.”

Restock Kroger began in 2017 with updates along the way, and it keys in on four areas, according to McMullen back when it launched: redefine the grocery customer experience, partner for customer value, develop talent and live the Kroger purpose.

Gary Millerchip, senior vice president and chief financial officer, shared a similar sentiment to McMullen, that Kroger will continue to invest in its store brands. "This includes ongoing investments in talent, price, digital, and store experience, with an even greater emphasis on our competitive moats, Fresh, Our Brands and Personalization," he said.

As for fourth quarter sales, the Cincinnati-based company reported earnings of $28.9 billion, up from $28.3 billion a year ago. Taking away fuel and dispositions, sales grew by 2.3% in the quarter.

Total sales in 2019 reached $122.3 billion. 

The company did note that in the fourth quarter, as a consequence of the Lucky’s Market bankruptcy, Kroger reported a non-cash charge of $174 million in the quarter and deconsolidated Lucky’s Market from its consolidated financial statements, adding that there is no effect on adjusted net earnings per diluted share or adjusted free cash flow guidance for 2020 as a result of this charge.