Kroger struggles in 2016

by Monica Watrous
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 Simple Truth
Consumers may now buy Simple Truth products on-line.
 
CINCINNATI — In an otherwise disappointing year for The Kroger Co., the retailer’s store brands, particularly Simple Truth and Simple Truth Organic, achieved record performance.

 

Net earnings attributable to Kroger in the year ended Jan. 28 were $1,975 million, or $2.08 per share on the common stock, down from $2,039 million, or $2.09, in the prior fiscal year. Excluding charges related to the restructuring of certain multi-employer pension obligations, adjusted net earnings totaled $2,046 million in fiscal year 2016.

Sales for the year advanced to $115,337 million from $109,830 million.

In the fourth quarter, net earnings were $506 million, or $0.54 per share, down from $559 million, or $0.57, in the year-ago period. Sales were $27,611 million, up from $26,165 million in the comparable quarter.

Rodney
Rodney McMullen, chairman and CEO of Kroger

Identical supermarket sales, without fuel, rose 1 percent for the year but eased 0.7 percent in the quarter, marking the company’s first quarterly decline in 13 years, driven by deflation.

“Last year certainly didn’t end the way we expected at the start of the year, but 2016 still had its bright spots,” said Rodney McMullen, chairman and CEO, during a March 2 earnings call with financial analysts.

Kroger’s corporate brands business was one such highlight, he said.

“Our brands are in more homes than ever before,” McMullen said. “In fact, our customers fill their carts with more than 1.25 million corporate brand items every hour.

“We are incredibly proud of the quality of our corporate brand products. Our quality is only getting better, and that showed clearly in the corporate brands’ performance last year, when we sold a record number of units, and in the fourth quarter, when corporate brands hit an all-time high unit share of 29.2 percent.”

Simple Truth led the way, reaching total sales of $1.7 billion in 2016. Simple Truth Organic accounted for more than $1 billion of that figure.

“And we still see more growth ahead in our Simple Truth and Simple Truth Organic lines,” McMullen said. “In fact, we’ve begun offering Simple Truth to even more customers throughout the United States, by making it available on Vitacost.com. Today, you can find on-line, and conveniently ship to home, many of our Simple Truth food, snacks, and supplements, as well as household and personal care products.

“Interestingly, New York City is already the No. 2 Simple Truth online sales market for us, even though we don’t have store physical presence there.”

Looking ahead, Kroger expects a similarly challenging operating environment in the first half of the year, with trends improving over the second half as the company cycles the previous year. The company expects identical supermarket sales, excluding fuel, to be flat to up 1 percent for 2017. Over the long term, the company expects to achieve net earnings per diluted share growth rate of 8 percent to 11 percent, plus an increasing dividend. 

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