Kroger reported Q2 2024 results featuring softer sales but also stronger profits. Comparable sales of +1.1% were driven by Ocado (+17%), curbside (+10%), and GLP-1 prescriptions. This puts underlying grocery store comps in the -1% range and below the industry’s +2.2% growth rate. Basket size was down due to fewer items in the basket; recall our earlier analysis about households shopping multiple banners to cherry pick.
In terms of traffic by banner, our data indicates Food 4 Less was up +3% (benefitting from its status as a deep value brand) whereas the Kroger banner was down -1% and City Market was down -2%. Looking at just Food 4 Less, visitor counts of those that visited 2 or more times over the past three months is up +8%.
Looking at Food 4 Less cross-shopping trends (using a minimum of 2 visits), we also see meaningful cross-visitation trends with deep discount Aldi, Trader Joe's, and Grocery Outlet (below).
Kroger’s gross margin was more impressive, up +42 basis points due to strong private label growth, lower prices from vendors, and reducing the spoilage in its fresh categories (i.e., operating better). Kroger CEO Rodney McMullen noted, "we're now seeing other customer segments [beyond the most budget-conscious customers] beginning to make changes as well. Customers are purchasing lower-priced cuts of meat, buying less and focusing on essentials. Budget-conscious customers are buying more at the beginning of the month to stock up on essential items and groceries. And then as the month progresses, they are more cautious with their spending. In response, we are supporting our customers by keeping prices low through promotions, including loyalty discounts, personalized offers and fuel rewards.” McMullen's comments line up with Dollar General, but not Walmart. Walmart is taking share and capturing the trade-down higher-income customer. Walmart is also growing lower-income households who are picking the retailer for its everyday low prices.
