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Kroger (KR) On Track to Boost Digital Business, Reinstates View
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Amid a transforming retail landscape where consumers are resorting to digital transactions, companies such as The Kroger Co. (KR - Free Report) are adopting ambitious strategies to keep strengthening their online business model. Progressing on such lines, Kroger highlighted plans to convert the strong digital sales momentum witnessed amid the pandemic into long-term competitive advantages. In a virtual investor day event, held on Mar 31, this renowned supermarket retailer provided updates regarding its strategic initiatives and plans to boost shareholders’ return.
Moreover, the company reiterated its guidance for fiscal 2021. The view includes continued expectations of a decline in identical sales this year. This seems to have dismayed Investors as shares of the company fell 5.5% during yesterday’s trading session.
Digital Business is Fundamental to Growth
Although the society is gradually going back to the old-normal, thanks to the roll-out of vaccines, companies are striving to identify prudent tactics to stay afloat in a post-COVID world. In this context, consumers’ continued inclination toward online shopping is pushing retailers to evolve their omni-channel platform and revamp digital business models.
In fact, Kroger now recognizes its digital business as a crucial growth engine in this rapidly-evolving retail ecosystem. To ensure that the digital wing continues to yield, the company plans to keep investing toward boosting efficiency and convenience. According to sources, the company plans to double digital sales by the end of 2023. It plans to direct its strategic endeavors and transformation efforts such as Restock Kroger, Leading With Fresh and Accelerating With Digital programs toward boosting omni-channel capabilities. Per sources, the company plans to boost e-commerce by expanding assortments, especially by adding more fresh items. Moreover, the company plans to fulfill online orders with greater efficiency through expanded automation across facilities. Apart from these, the company plans to boost ad revenues from its online business channel.
Speaking of digital endeavors, Kroger has long been focusing on expanding its pick up in store facilities for online orders along with providing contact-free payment solutions like Scan, Bag and Go and Kroger Pay. It also provides digital coupons and smart shopping lists to attract greater online traffic. It also started accepting Supplemental Nutrition Assistance Program (SNAP) benefits for pickup orders. The company also makes use of Nuro’s fully autonomous, driverless vehicles for grocery delivery services. Apart from this, Kroger’s partnerships with Blackhawk Network, Mirakl and Alibaba have expanded and added more features to its online business. We note that digital sales surged 118% during the fourth quarter of fiscal 2020, with pickup or delivery reaching more than 98% of Kroger households. Other retailers, who have been focusing heavily on boosting omni-channel capabilities, include Target Corporation (TGT - Free Report) , Walmart Inc. (WMT - Free Report) and Best Buy Co., Inc. (BBY - Free Report) .
Shareholder Returns & Guidance
Kroger’s focus on building its digital business along with efforts to boost product offerings and efficient customer engagement strategies have helped maintain the company’s dominant position among the nation’s largest grocery retailers. Markedly, the company expects to deliver total shareholder returns in the bracket of 8-11%, through earnings growth of 3-5% as well as strong cash position.
Coming to the company’s outlook for fiscal 2021, it continues to expect identical sales, without fuel, to drop 3-5%. Markedly, identical sales without fuel grew 14.1% in fiscal 2020. On a two-year basis, identical sales are expected to rise in the band of 9.1-11.1%. Also, the company anticipates FIFO operating profit in the band of $3.3-$3.5 billion. The company reported adjusted FIFO operating profit of $4.1 billion in fiscal 2020. On a two-year CAGR basis, the metric is expected to rise 5.4-8.5%.
Further, the company continues to expect adjusted earnings for fiscal 2021 in the range of $2.75-$2.95. We note that the company reported adjusted earnings of $3.47 per share in fiscal 2020. On a two-year CAGR basis, earnings are expected to grow 12-16%.
As projected earlier, management envisions capital expenditures in the band of $3.4-$3.6 billion and expects to generate free cash flow between $1.6 billion and $1.8 billion in fiscal 2021.
Shares of this Zacks Rank #3 (Hold) company have increased 12% in a year versus the industry’s decline of 6.2%.
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
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Kroger (KR) On Track to Boost Digital Business, Reinstates View
Amid a transforming retail landscape where consumers are resorting to digital transactions, companies such as The Kroger Co. (KR - Free Report) are adopting ambitious strategies to keep strengthening their online business model. Progressing on such lines, Kroger highlighted plans to convert the strong digital sales momentum witnessed amid the pandemic into long-term competitive advantages. In a virtual investor day event, held on Mar 31, this renowned supermarket retailer provided updates regarding its strategic initiatives and plans to boost shareholders’ return.
Moreover, the company reiterated its guidance for fiscal 2021. The view includes continued expectations of a decline in identical sales this year. This seems to have dismayed Investors as shares of the company fell 5.5% during yesterday’s trading session.
Digital Business is Fundamental to Growth
Although the society is gradually going back to the old-normal, thanks to the roll-out of vaccines, companies are striving to identify prudent tactics to stay afloat in a post-COVID world. In this context, consumers’ continued inclination toward online shopping is pushing retailers to evolve their omni-channel platform and revamp digital business models.
In fact, Kroger now recognizes its digital business as a crucial growth engine in this rapidly-evolving retail ecosystem. To ensure that the digital wing continues to yield, the company plans to keep investing toward boosting efficiency and convenience. According to sources, the company plans to double digital sales by the end of 2023. It plans to direct its strategic endeavors and transformation efforts such as Restock Kroger, Leading With Fresh and Accelerating With Digital programs toward boosting omni-channel capabilities. Per sources, the company plans to boost e-commerce by expanding assortments, especially by adding more fresh items. Moreover, the company plans to fulfill online orders with greater efficiency through expanded automation across facilities. Apart from these, the company plans to boost ad revenues from its online business channel.
Speaking of digital endeavors, Kroger has long been focusing on expanding its pick up in store facilities for online orders along with providing contact-free payment solutions like Scan, Bag and Go and Kroger Pay. It also provides digital coupons and smart shopping lists to attract greater online traffic. It also started accepting Supplemental Nutrition Assistance Program (SNAP) benefits for pickup orders. The company also makes use of Nuro’s fully autonomous, driverless vehicles for grocery delivery services. Apart from this, Kroger’s partnerships with Blackhawk Network, Mirakl and Alibaba have expanded and added more features to its online business. We note that digital sales surged 118% during the fourth quarter of fiscal 2020, with pickup or delivery reaching more than 98% of Kroger households. Other retailers, who have been focusing heavily on boosting omni-channel capabilities, include Target Corporation (TGT - Free Report) , Walmart Inc. (WMT - Free Report) and Best Buy Co., Inc. (BBY - Free Report) .
Shareholder Returns & Guidance
Kroger’s focus on building its digital business along with efforts to boost product offerings and efficient customer engagement strategies have helped maintain the company’s dominant position among the nation’s largest grocery retailers. Markedly, the company expects to deliver total shareholder returns in the bracket of 8-11%, through earnings growth of 3-5% as well as strong cash position.
Coming to the company’s outlook for fiscal 2021, it continues to expect identical sales, without fuel, to drop 3-5%. Markedly, identical sales without fuel grew 14.1% in fiscal 2020. On a two-year basis, identical sales are expected to rise in the band of 9.1-11.1%. Also, the company anticipates FIFO operating profit in the band of $3.3-$3.5 billion. The company reported adjusted FIFO operating profit of $4.1 billion in fiscal 2020. On a two-year CAGR basis, the metric is expected to rise 5.4-8.5%.
Further, the company continues to expect adjusted earnings for fiscal 2021 in the range of $2.75-$2.95. We note that the company reported adjusted earnings of $3.47 per share in fiscal 2020. On a two-year CAGR basis, earnings are expected to grow 12-16%.
As projected earlier, management envisions capital expenditures in the band of $3.4-$3.6 billion and expects to generate free cash flow between $1.6 billion and $1.8 billion in fiscal 2021.
Shares of this Zacks Rank #3 (Hold) company have increased 12% in a year versus the industry’s decline of 6.2%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Click here for the 4 trades >>