Kroger sees success with Simple Truth

by Monica Watrous
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Kroger Simple Truth and Simple Truth Organic brand products
Kroger's Simple Truth brands continue to grow.

CINCINNATI – The Kroger Co.’s Simple Truth and Simple Truth Organic private label brands continue to grow at what the company considers “an astonishing pace.” The product lines, which debuted in 2012 and achieved $1.2 billion in sales last year, set a record high for total sales in the recent quarter, said Mike Schlotman, executive vice president and CFO.

For the third quarter ended Nov. 7, Kroger earned $428 million, or 44 cents per share on the common stock, up from $362 million, or 37 cents per share, for the prior-year period. As a result of lower fuel prices, sales increased 0.4 percent to $25.075 billion, up from year-ago sales of $24.987 billion. Excluding fuel, total sales advanced 5.5 percent, the company said.

Identical supermarket sales, excluding fuel, rose 5.4 percent in the quarter over the year-ago period, marking the company’s 48th consecutive quarter of positive growth.

“Corporate brands performance during the third quarter was strong, representing approximately 27.7 percent of total units sold and 25.9 percent of sales dollars, excluding fuel and pharmacy,” Schlotman said during a Dec. 3 earnings call with financial analysts.

Kroger’s latest brand, which debuted in October, is off to a great start, he added. Billed as a “journey of epicurean proportions,” HemisFares’ initial launch included more than two dozen products imported from Italy, such as dry pasta, jarred sauces and gelato. The company said it plans to add more products from regions in Spain, Japan and other countries over the next year.

Kroger Hemisfares products
Kroger said its new Hemisfares brand has been embraced by consumers.

“Our newest brand, HemisFares, has been embraced by foodie customers, so much so that we are currently working with our Sicilian gelato supplier to expand capacity while maintaining the best in the world quality of the product,” Schlotman said.

Based on strong year-to-date performance, the company has raised its net earnings per diluted share guidance to a range of $2.02 to $2.04, up from a previous target of $1.92 to $1.98 per diluted share, which exceeds the company’s long-term growth rate guidance of 8 percent to 11 percent. Kroger expects identical supermarket sales growth, excluding fuel, of approximately 5 percent to 5.25 percent for the full year.

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