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Kroger's (KR) Operational Efforts Help Stay Ahead of the Curve
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In recent years, a major transformation has been seen in the grocery industry due to increasing e-commerce penetration, changing consumer behavior and stiff competition. The Kroger Co. (KR - Free Report) , being laser-focused, has been redefining strategies and upgrading capabilities to stay ahead of the curve. Quality, price, customer shopping experience and reward programs have been its key areas of focus.
Let’s Introspect
Kroger, which operates in the thin-margin grocery industry, has been undergoing a complete makeover with respect to products and how consumers prefer shopping. The company has been adding new products as well as eyeing technological expansion to enhance its omnichannel reach.
Kroger has been making significant investments to enhance product freshness and quality and expand digital capabilities. The company has been introducing new items under its “Our Brands” portfolio. During the final quarter of fiscal 2022, Our Brands’ identical sales rose 10.1%, while digital sales grew 12%, led by 22% growth in Delivery Solutions.
Image Source: Zacks Investment Research
We note that Kroger’s digital business remains one of its key growth drivers due to Kroger Delivery Now, the Boost membership program and the rollout of customer fulfillment centers. The company’s ‘Kroger Delivery Now’ service provides customers with food and household staples in 30 minutes. Additionally, Kroger has been expanding its customer fulfillment centers to ensure efficient deliveries.
Last year in October, Kroger entered into a deal to acquire Albertsons Companies (ACI - Free Report) . The tie-up would help strengthen its position in the competitive grocery space. The combined entity would benefit from a loyal customer base and a broader portfolio.
Wrapping Up
We believe that Kroger’s focus on fresh offerings, technology and process improvements to lower costs, a seamless digital ecosystem and the margin-rich alternative profit business should continue contributing to growth. Management believes that Kroger’s Leading with Fresh and Accelerating with Digital initiatives should help generate sustainable total shareholder returns of 8-11% over time.
Management envisions identical sales, without fuel, to be up 1% to 2% in fiscal 2023, with underlying growth of 2.5% to 3.5% after adjusting for the effect of Express Scripts. The company anticipates the adjusted FIFO operating profit in the band of $5-$5.2 billion compared with the $5.1 billion reported in fiscal 2022. Kroger anticipates fiscal 2023 adjusted earnings between $4.45 and $4.60 per share, suggesting an increase from the adjusted earnings of $4.23 reported in fiscal 2022.
Here we have highlighted two other top-ranked stocks, namely BJ's Wholesale Club (BJ - Free Report) and General Mills (GIS - Free Report) .
BJ's Wholesale Club, which operates warehouse clubs, carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 9.3%.
The Zacks Consensus Estimate for BJ's Wholesale Club’s current financial-year sales and earnings suggests growth of 7.3% and 0.8% from the year-ago period. BJ has a trailing four-quarter earnings surprise of 19.6%, on average.
General Mills, which manufactures and markets branded consumer foods, currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 7.5%.
The Zacks Consensus Estimate for General Mills’ current financial-year sales and earnings suggests growth of 6.3% and 7.4% from the year-ago period. GIS has a trailing four-quarter earnings surprise of 8.1%, on average.
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Kroger's (KR) Operational Efforts Help Stay Ahead of the Curve
In recent years, a major transformation has been seen in the grocery industry due to increasing e-commerce penetration, changing consumer behavior and stiff competition. The Kroger Co. (KR - Free Report) , being laser-focused, has been redefining strategies and upgrading capabilities to stay ahead of the curve. Quality, price, customer shopping experience and reward programs have been its key areas of focus.
Let’s Introspect
Kroger, which operates in the thin-margin grocery industry, has been undergoing a complete makeover with respect to products and how consumers prefer shopping. The company has been adding new products as well as eyeing technological expansion to enhance its omnichannel reach.
Kroger has been making significant investments to enhance product freshness and quality and expand digital capabilities. The company has been introducing new items under its “Our Brands” portfolio. During the final quarter of fiscal 2022, Our Brands’ identical sales rose 10.1%, while digital sales grew 12%, led by 22% growth in Delivery Solutions.
Image Source: Zacks Investment Research
We note that Kroger’s digital business remains one of its key growth drivers due to Kroger Delivery Now, the Boost membership program and the rollout of customer fulfillment centers. The company’s ‘Kroger Delivery Now’ service provides customers with food and household staples in 30 minutes. Additionally, Kroger has been expanding its customer fulfillment centers to ensure efficient deliveries.
Last year in October, Kroger entered into a deal to acquire Albertsons Companies (ACI - Free Report) . The tie-up would help strengthen its position in the competitive grocery space. The combined entity would benefit from a loyal customer base and a broader portfolio.
Wrapping Up
We believe that Kroger’s focus on fresh offerings, technology and process improvements to lower costs, a seamless digital ecosystem and the margin-rich alternative profit business should continue contributing to growth. Management believes that Kroger’s Leading with Fresh and Accelerating with Digital initiatives should help generate sustainable total shareholder returns of 8-11% over time.
Management envisions identical sales, without fuel, to be up 1% to 2% in fiscal 2023, with underlying growth of 2.5% to 3.5% after adjusting for the effect of Express Scripts. The company anticipates the adjusted FIFO operating profit in the band of $5-$5.2 billion compared with the $5.1 billion reported in fiscal 2022. Kroger anticipates fiscal 2023 adjusted earnings between $4.45 and $4.60 per share, suggesting an increase from the adjusted earnings of $4.23 reported in fiscal 2022.
Shares of this Zacks Rank #1 (Strong Buy) company have risen 9.7% in the past six months compared with the industry’s growth of 13.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
2 More Stocks You May Bet On
Here we have highlighted two other top-ranked stocks, namely BJ's Wholesale Club (BJ - Free Report) and General Mills (GIS - Free Report) .
BJ's Wholesale Club, which operates warehouse clubs, carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 9.3%.
The Zacks Consensus Estimate for BJ's Wholesale Club’s current financial-year sales and earnings suggests growth of 7.3% and 0.8% from the year-ago period. BJ has a trailing four-quarter earnings surprise of 19.6%, on average.
General Mills, which manufactures and markets branded consumer foods, currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 7.5%.
The Zacks Consensus Estimate for General Mills’ current financial-year sales and earnings suggests growth of 6.3% and 7.4% from the year-ago period. GIS has a trailing four-quarter earnings surprise of 8.1%, on average.