This past Friday, Sep 11, 2020, Cincinnati based grocer Kroger conducted its Q2 2020 Earnings Call. Speaking about the results Chairman and CEO Rodney McMullen “Each day I’m inspired by the work our incredible associates do to bring to life our purpose, to Feed the Human Spirit. I am proud of our dedicated associates who are serving our customers when they need us most. Our top priority is to provide a safe environment for associates and customers and as the pandemic continues, we will continue to rise to meet the challenge.

Customers are at the center of everything we do and, as a result, we are growing market share. Kroger’s strong digital business is a key contributor to this growth, as the investments made to expand our digital ecosystem are resonating with customers. Our results continue to show that Kroger is a trusted brand and our customers choose to shop with us because they value the product quality and freshness, convenience, and digital offerings that we provide.

We delivered extremely strong results in the second quarter and expect to deliver consistently attractive total shareholder returns. We are more certain than ever that the strategic choices and investments made through Restock Kroger to execute against our competitive moats – Fresh, Our Brands, Personalization and Seamless – have positioned Kroger to meet the moment, especially as customers are rediscovering their passion for food at home.”

McMullen went on to discuss private brand referencing our exclusive research without crediting it:

“Our brands is also a key competitive moat for Kroger. We continue to meet the diverse needs of our customers with significant growth across the three largest brands. Our customers are eating more at home and we are seeing some customer segments trade up to the larger pack sizes as well as more premium quality foods and natural and organic foods. Our larger-sized big pack platform is up well over 50%.

Private Selection is up over 17% and Simple Truth is up over 20% in the second quarter. Our brands continues to tap into emerging trends and evolving customer needs, delivering new flavors and innovative new items like the new plant-based Emerge grinds and patties which launched in late 2019.

A recent third-party industry study reconfirmed that Simple Truth is the most-loved natural and organic brand in the U.S. Simple Truth significantly outperformed competitors on strength of brand which is a combination of awareness, willingness to recommend.

In continuing to exceed our customers’ expectations of value and quality while also consistently delivering innovative new items our customers love, our brands remain one of our most powerful competitive advantages. Finally, personalization and data remains one of Kroger’s key and core competitive moats. We use our data to understand what is most important to our customers and continued to offer promotions throughout the quarter. And we think it is an important component to continue to support as the pandemic continues and government stimulus benefits have expired.”

Total company sales were $30.5 billion in the second quarter, compared to $28.2 billion for the same period last year. Excluding fuel, sales grew 13.9%.

Gross margin was 22.8% of sales for the second quarter. The FIFO gross margin rate, excluding fuel, increased 5 basis points primarily driven by sourcing efficiencies, sales leverage and growth in alternative profit streams. This was partially offset by price investments and mix changes.

2020 Guidance

Comments from CFO Gary Millerchip
“As a result of our strong performance in the first half, the expectation of sustained trends in food at-home consumption and confidence in our ability to execute against the Restock Kroger strategy, we are updating our full year 2020 guidance.

There are still many uncertainties and, as a result, we are providing a wider guidance range. For the full year 2020, we expect total identical sales without fuel to exceed 13% and we expect to achieve adjusted EPS growth of approximately 45% to 50%.

Relative to delivering on our total shareholder return growth targets as outlined at our November 2019 Investor Day, these factors also lead us to believe that our 2021 business results will be higher than we would have expected prior to the COVID-19 pandemic.”