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Kroger: Making it Look Fresh & Easy

Thomas Paulson
Dec 2, 2022
Kroger: Making it Look Fresh & Easy

Key Kohl's Metrics

  • Kroger produced another solid quarterly result with a consistent three-year comparable-store sales CAGR, in-line with Albertsons' CAGR but behind Walmart and Publix. Based upon a continued strong rate of sales and execution, Kroger lifted its full-year guidance. CEO Rodney McMullen shared, “During the quarter, we continue to see many of the same shopping trends we observed throughout the year…We continue to see overall household growth and significant loyal household growth.”
  • Behind that raised outlook was strong growth in its owned brands (+10.4%), product inflation being passed along to the consumer, and improving traffic. McMullen, “If you look at the overall trends in traffic, it continues to be improving.” shows that the “improving” would only be the Kroger banner from the viewpoint of August to October.

  • CFO Gary Millerchip: "We are seeing higher trips from those loyal shoppers that have traditionally shopped in many different retailers for different categories and now seeing that trip consolidate to Kroger. I think it is an important trend that we've seen throughout the year and continue to accelerate in the third quarter." (This is a trend that we have observed and written about in the Anchor as it relates to Sprouts Farmers Markets.)
  • Trailing-twelve-month (TTM) sales per square foot increased $10 QoQ to $709 and the figure likely increases to $730 by next year. TTM EBITDA and free cash flow increased from $7.6B and $4.5B, respectively, to $7.8B and $4.3B. It's likely that the figures increase by nearly $800M / $500M over the next year.
  • On the pending merger with Albertsons, McMullen shared, “Our merger will lower prices for customers starting day 1, continued investments in our associates and stores and customer experience and do even more in our communities than either company can do alone…We are making early progress on our integration planning as expected and we continue to engage with all of our stakeholders and regulators. We are advancing our road map to close the transaction in early 2024.”
  • On inflation, Millerchip shared, “We've seen inflation starting to level. It's still obviously at very heightened levels. But if you look at the trend quarter-over-quarter, it really narrowed down to less than 1% increase in inflation in our 3Q22 versus our 2Q22.”

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Thomas Paulson

Director of Research and Business Development,

Thomas Paulson spent 20 years as a Wall Street analyst and a member of asset management teams at AllianceBernstein and Cornerstone Capital, representing top-50 ownership positions including Target, Home Depot, Nike, Amazon, Google, and many more. He brings consumer related expertise and knowledge of enterprises in retail, CPG, financial services, telecom, and entertainment.

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