The Kroger Co. ended fiscal 2021 with strong net same sales growth in the fourth quarter, beating high-end analysts’ earnings per share projections for the quarter and year.
Cincinnati-based Kroger said Thursday that for the fourth quarter ended Jan. 29, net sales totaled $33.05 billion, up 7.5% from $30.74 billion a year earlier. earlier. Excluding fuel, sales increased by 3.7%. Identical sales without fuel increased 4% and 14.6% on a two-year battery, the company reported. The gains generated growth of 6.4% (10.7% excluding fuel) in net sales and 10.6% (excluding fuel) in identical sales for the fourth quarter of fiscal 2020.
Overall net sales in fiscal 2021 were $137.89 billion, up 4.1% from $132.5 billion in fiscal 2020. Kroger’s 2021 sales edged up 0.2%. Identical sales excluding fuel increased by 0.2% and were up 14.3% over two years. Kroger achieved the growth after adding $10 billion to its revenue in fiscal 2020, when the retailer posted 8.4% (14.2% excluding fuel) growth in net sales and 14.1% (excluding fuel) of identical sales.
“The strength of our sales in 2021 demonstrates our ability to meet our customers, however they choose to engage with us,” said Rodney McMullen of Kroger.
“Our strategy of leading fresh and accelerating with digital propelled Kroger to record performance in 2021, on top of record results in 2020. We are incredibly proud of our associates who continue to meet the needs of our customers. during the pandemic,” said Kroger’s chairman and CEO. Rodney McMullen told analysts in a webcast Thursday.
“In 2021, our team delivered to all stakeholders, first by achieving positive year-over-year identicals without fuel against very strong identicals last year and a two-year stack 14.3%,” McMullen said. “Additionally, by connecting with customers through the expansion of our transparent ecosystem and the remarkable consistent delivery of a comprehensive and user-friendly customer experience for all, in addition to investing more than ever in our associates to increase our average hourly rate at $17 and our average hourly rate at over $22, when you also include compensation and benefits.
He also noted that the company’s Kroger Health arm had administered nearly 11 million doses of the COVID-19 vaccine.
E-commerce sales fell 13.3% in the fourth quarter of 2021 and 3.2% for the year as a whole, on the heels of an explosive growth of 118% in the fourth quarter of 2020 and 116 % over the year. On a two-year stack, digital sales grew 105% through the end of the fourth quarter of fiscal 2021 and 113% through the end of the year.
“The strength of our sales in 2021 demonstrates our ability to meet our customers however they choose to engage with us, whether in-store or online. At the same time, we actively encourage customers to interact with us on our digital platforms, even when shopping in-store. In effect, when a customer digitally engages with us, they spend more with Kroger across all modalities,” McMullen said.
Kroger’s digital sales soared 105% over two years to the end of fiscal 2021, propelled by a growth spurt amid the pandemic.
“We continue to attract new customers to our digital platforms. During the quarter, we saw a 25% increase in new household acquisitions for seamless pickup and delivery compared to the third quarter. We remain committed to doubling digital sales and profitability by 2023, which was announced in 2021,” he explained, adding, “We do not expect digital growth to be linear, d especially as we cycle the peak of sales in 2020 and customers become more comfortable shopping. again in store.
On the grocery side, Kroger expanded its Our Brands private label portfolio with 660 new products in fiscal 2021, including 72 new items in the fourth quarter. The year also marked a milestone for Kroger’s Home Chef meal kit business, McMullen noted.
“Our brands continue to resonate with customers and maintain a culture of innovation, launching over 660 new items during the year. More than half of these new items were part of our Simple Truth and Private Selection portfolios,” he said. “We’ve accelerated Home Chef’s incredible milestone of becoming a billion-dollar brand – our fourth billion-plus brand, which is pretty special.”
Kroger also announced the completion of the first phase of its in-store End-to-End Fresh program and completed the conversion of specialty cheese stores to the Murray’s Cheese brand in 260 stores.
“Kroger is leading with fresh. Our fresh departments exceeded the company’s total non-fuel identical sales during the fourth quarter. Kroger remains the #1 retailer in many exciting areas, such as specialty cheeses, sushi and flowers. As the largest florist in the world, we sold over 76 million flower stems for Valentine’s Day alone,” McMullen said.
“We have completed the initial testing phase of our End-to-End Fresh initiative, focused on bringing more days of freshness to our customers, and are confident in its scalability and our plans to expand into more targeted stores across the country,” he said. added.
McMullen noted that Kroger has increased its average hourly wage for associates to $17, a figure that exceeds $22 including pay and benefits.
CFO Gary Millerchip also singled out new offerings as a sales driver. “Kroger reported identical non-fuel sales at 4%, our best quarter of the year, with new departments leading the way,” he said on the call with analysts.
Private labels and gasoline, boosted by fuel rewards, also help Kroger stand out to consumers, according to Millerchip.
“Our brands are also an important differentiator for Kroger in this environment, providing customers with an unparalleled combination of high quality and high value. Our strategic approach helps our customers manage their grocery budgets more effectively and allows Kroger to maintain a strong price position against our key competitors,” he said. “Fuel also remains an important part of our overall value proposition for our customers, and we continue to invest in our fuel program in 2021. Customers who redeem fuel points spend an average of four times more at Kroger and visit four times more frequently. Our investment in fuel rewards, which is reflected in our supermarket gross margin, also helps customers maximize their dollars and helped us achieve 5% gallon growth in the fourth quarter, outpacing growth in Marlet. »
Ultimately, Kroger posted net income in the fourth quarter of fiscal 2021 (attributable to the company) of $566 million, or 75 cents per diluted share, compared to a net loss of $77 million, or 10 cents per share, a year ago. For the full year, net income (attributable to Kroger) was $1.66 billion, or $2.17 per diluted share, compared to $2.56 billion, or $3.27 per share diluted, in fiscal 2020.
On an adjusted basis, Kroger reported net income of $686 million, or 91 cents per diluted share, for the fourth quarter and $2.8 billion, or $3.68 for fiscal 2021, compared to adjusted results for fiscal 2020 of $630 million (81 cents EPS diluted) in the fourth quarter and $2.74 billion ($3.47 EPS diluted) for the full year.
Analysts, on average, had forecast Kroger’s adjusted EPS in the fourth quarter of fiscal 2021 at 74 cents, with estimates ranging from 66 cents to 84 cents, according to Refinitiv. The full-year consensus projection was for adjusted EPS of $3.52, with a range of $3.45 to $3.64.
In its outlook for fiscal 2022, Kroger expects adjusted EPS of $3.75 to $3.85 and identical sales growth of 2% to 3% (excluding fuel). A year ago, the company expected ID sales to decline in 2021. Analysts estimate Kroger’s adjusted EPS for 2022 at $3.45 on average, with estimates ranging from $3.14 to $3.80, according to Refinitiv.
“As we look to 2022, we expect our business momentum to continue and are confident in our ability to navigate a rapidly changing operating environment,” McMullen said. “We leverage technology, innovation and our competitive moats to create sustainable competitive advantages. Our balanced model allows us to meet shareholder needs, invest in our associates, continue to provide fresh, affordable food to our customers and support our communities. »
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