CINCINNATI — Ongoing inflation is providing a boost to The Kroger Co.’s portfolio of private brands, as many budget-conscious shoppers seek to curb costs. The grocery retailer in the latest quarter saw “incredible engagement” in the business, which includes Simple Truth, Private Selection and other product lines, “with identical sales growth of 10.2% compared to last year,” said W. Rodney McMullen, chairman and chief executive officer.
“This increase was led by our Kroger and Home Chef brands,” Mr. McMullen said during a Sept. 9 earnings call. “Convenience remains a priority, and Home Chef is meeting that need by providing high-quality family meals as a budget-friendly alternative to eating out at restaurants.
“For other customers who are enjoying cooking from scratch, Our Brands are delivering innovative products at a great value. So, Our Brands’ product strategy is rooted in quality, providing customers with memorable meal experiences they crave.”
Kroger recently unveiled its lower-priced Smart Way product line, which includes canned vegetables, bread, juices and other staples. The company also expanded its Simple Truth plant-based product assortment during the quarter.
“We believe the unmatched combination of innovation, quality and value provided by Our Brands is a clear competitive advantage as inflation remains front of mind for many of our customers,” said Gary Millerchip, chief financial officer.
Net earnings attributable to Kroger for the second quarter ended Aug. 13 totaled $731 million, equal to $1.01 per share on the common stock, up 57% from $467 million, or 62¢ per share, in the prior-year period. Kroger recorded a gain on investment of $78 million in the recent quarter. In the year-ago quarter, Kroger recorded a loss on investment of $93 million and transformation costs of $43 million. Excluding items affecting comparability, Kroger’s net earnings on an adjusted basis were $661 million, up from $610 million the year before.
Second-quarter sales were $34.6 billion, up 9.1% from $31.7 billion the year before.
Identical sales excluding fuel increased 5.8% over the year-ago quarter.
Mr. Millerchip credited increased sales of fuel, disciplined margin management and strong fuel profitability for the solid quarterly results.
“We continue to identify opportunities to remove costs from our business without affecting the customer experience and they’re on track to deliver our fifth consecutive year of $1 billion in cost savings,” he added.
Kroger’s leadership team has raised its full-year guidance based on strong first-half performance.
“We now expect identical sales without fuel to be in the range of 4% to 4.5% and adjusted net earnings per diluted share in the range of $3.95 to $4.05,” Mr. Millerchip said. “Our business model has proven to be resilient in a variety of operating and economic environments and we remain confident in our ability to deliver attractive and sustainable total shareholder returns of 8% to 11% over time.”
Net earnings attributable to Kroger for the first six months of the year were $1.4 billion, or $1.92 per share, up from $607 million, or 80¢ per share, the year before. Year-to-date sales totaled $79.2 billion, up from $73 billion in the same period last year.
Shares of Kroger trading on the New York Stock Exchange closed at $51.94 on Sept. 9, up 7.4% from $48.36 the day before. FBN