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Kroger Offers Cautious Sales Forecast as New CEO Takes Over
Grocery Competition Intensifies as Consumers Watch Costs
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Kroger Co.’s new CEO laid out a value-focused vision to boost top-line growth of the largest U.S. supermarket operator.
CEO Greg Foran said Kroger is working to become more competitive by taking out costs from unproductive areas and using that capital on price investments and customer experience.
“We need to grow sales faster,” Foran said on a call with analysts. “That comes down to giving customers a compelling reason to shop with you by offering great value, great products and a great experience.”
Shares rose 4.5% at 10:01 a.m. on March 5 in New York. Kroger’s stock had gained 8.8% this year through the March 2 close.
The company set expectations low for its new CEO, projecting that comparable sales without fuel will increase between 1% and 2% on the year, below what Wall Street analysts were expecting.
Foran, who’s in his fourth week as the top boss, didn’t field all the questions during the call. But he did say that he’s reviewing the company’s strategic plan as he meets with the team and visits stores, distribution centers and manufacturing facilities.
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Foran
Kroger has a strong position in fresh offerings such as produce, protein, bakery or deli, Foran said, though the grocery assortment can be “too extensive” in some cases. Kroger will look to accelerate growth of its e-commerce business, which now generates more than $16 billion in sales, Foran added.
The Cincinnati-based retailer has been assessing its next steps following the abrupt exit of its former CEO and the failed merger with rival Albertsons Cos.
Supermarket shoppers are seeking to stretch their dollars, purchasing sale items and cheaper store brands. As they prioritize necessities, consumers remain largely reluctant to spend on discretionary products. This is particularly true among lower-income households.
In response, Kroger has also reintroduced paper coupons and expanded private-label offerings, while improving its assortment of fresh food. And the retailer has been rewriting its digital strategies, closing some fulfillment centers and expanding partnerships with third-party providers like Instacart Inc.
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Still, challenges lie. The company lost market share in the fourth quarter, Kroger executives said on the call. Competitors, including Walmart Inc. and Aldi Inc., are doubling down on low prices.
Foran, a New Zealander who is returning to the U.S. after wrapping up his tenure as CEO of Air New Zealand Ltd., is credited for turning around Walmart’s domestic business in the mid-to-late 2010s. At Walmart, he led efforts to lower prices and make stores cleaner and friendlier.
He’s coming back to an industry that has changed dramatically since then. Delivery and pickup became prominent ways of shopping during the pandemic, making operations more complicated for grocers. Many companies are also investing in non-retail offerings to boost profits, tapping into advertising, marketplace and others.
This has been a mixed earnings season for retailers, with companies pointing to a consumer who remains selective but is willing to spend for the right items.
Kroger ranks No. 31 on the Transport Topics Top 100 list of the largest private carriers in North America, and No. 3 on the TT grocery list.
