Kroger Rings Up Gains in Fight Against Wal-Mart, Amazon -- Update
November 30 2017 - 11:01AM
Dow Jones News
By Heather Haddon
Kroger Co.'s moves to prioritize online orders and cut food
prices appear to be paying off as the U.S. supermarket chain
battles Amazon.com Inc. and Wal-Mart Stores Inc. for customers.
The Cincinnati-based chain reported sales at established stores
grew by 1.1% in the latest quarter, topping expectations. That was
an improvement from flat sales growth during the same period last
year, but far weaker than past performance.
Shares jumped more than 10% during premarket trade Thursday on
the better-than-expected results.
Kroger eked out a profit increase of 1.5% from the year-ago
quarter as the grocer continued to add online ordering options to
stores and slashed the cost of staples in many markets.
Shares are down by more than a quarter this year as investors
worried about the company's plans for navigating an increasingly
competitive grocery industry after its past three disappointing
earnings reports.
The company said digital revenue more than doubled in the third
quarter ended Nov. 4. It reiterated its existing profit guidance
and said it expected the pace of identical-store sales to climb
above 1.1% in the fourth quarter and fiscal 2018.
Kroger is also adding products beyond food to its store aisles
to diversify its revenue and attract more customers. The company
plans to roll out its own clothing line next year, opened its first
restaurant this fall and added a high-end floral line for the
holidays.
Since Amazon bought Whole Foods Market this past summer, the
upscale grocer has cut prices on staples, helping to increase sales
more than 4% annually in the quarter ended in September.
Wal-Mart is also competing more aggressively for grocery
dollars, as the world's largest retailer has spruced up its stores,
slashed food prices and expanded its e-commerce offerings. The
retail giant reported its strongest quarterly U.S. sales growth in
nearly a decade earlier in November. Meanwhile, Wal-Mart's profit
has fallen as it spends billions of dollars to lower prices and
expanding its online grocery service to more than 1,000 stores. The
company plans to roughly double that figure in the next year.
Barclays Capital said competition from Wal-Mart has been growing
since the summer, according to the firm's analysis. More than 80%
of Kroger's 2,800 stores are within five miles of a Wal-Mart.
Kroger posted profits of 44 cents a share in the third quarter.
Analysts polled by Thomson Reuters had expected earnings per share
of 40 cents. The company reported a net profit of $397 million, or
44 cents a share, compared with $391 million, or 41 cents a share,
a year ago. Revenue grew 4.5% to $27.75 billion.
--Imani Moise contributed to this article.
Write to Heather Haddon at heather.haddon@wsj.com
(END) Dow Jones Newswires
November 30, 2017 10:46 ET (15:46 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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