Kroger sees sales skyrocket as pandemic drives at-home food consumption

Company says wages increased during 2020.

Kroger racked up $132.5 billion in sales in 2020 compared to $122.3 billion the year before, a more than 8 percent increase fueled by a change in food consumption during the pandemic.

“In addition to changing how we work, COVID-19 has changed how Kroger customers enjoy food,” Kroger CEO Rodney McMullen said during an earnings call Thursday. “We continue to see people eat and work more from home and prioritize health and cleanliness. We believe that these trends will continue even as restrictions ease and vaccinations are distributed.”

Total sales without fuel for the Cincinnati-based grocer rose 14.2% in 2020. Kroger also posted a $2.8 billion profit for the year, a boost to its bottom line that’s been linked to the rising popularity of curbside pickup and home delivery.

That ever-increasing amount of customers engaging in what McMullen called a “seamless ecosystem” helped boost digital sales grew 118%, including delivery sales growth of 249% during the quarter, McMullen said.

“When customers engage in both our in-store and online modalities, we see a 98% retention rate within our ecosystem, highlighting how sticky our customer engagement is,” he said.

Even with the uncertainty surrounding trends in the food at home market as COVID vaccines roll out, the company remains optimistic.

“Our insight suggests there are a number of consumer changes that have occurred during the pandemic that will prove to be more structural and lasting, which, combined with our strong execution and flexible financial model, give us confidence we will be able to manage through the current unknowns,” Gary Millerchip, Kroger’s senior vice president and chief financial officer, said during the call.

5 things to know about Kroger
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5 things to know about Kroger

Kroger expects sales to drop 3 to 5 percent this year, Millerchip said.

Last year’s rise in sales and profits also saw the company updating average hourly pay for its workers up to $15.50 compared to $15 last year. With comprehensive benefits factored in, its average hourly rate is more than $20, Millerchip said.

Kroger said it invested $300 million to boost regular wages to its associates last year. For this year, it expects to invest an incremental $350 million in continued average hourly wage increases for its associates, Millerchip said.

Also this week, Kroger reported a loss of $77 million for its fiscal fourth-quarter, which ended Jan. 30, after reporting a profit in the same period a year earlier.

The company said it had a loss of 10 cents per share. Earnings, adjusted for non-recurring costs, were 81 cents per share.

The results exceeded Wall Street expectations. The average estimate of eight analysts surveyed by Zacks Investment Research was for earnings of 69 cents per share.

The supermarket chain posted revenue of $30.74 billion in the period, which fell short of Street forecasts. Five analysts surveyed by Zacks expected $31.01 billion.

For the year, the company reported profit of $2.59 billion, or $3.27 per share. Revenue was reported as $132.5 billion.

Kroger expects full-year earnings in the range of $2.75 to $2.95 per share.

FILE- In this June 15, 2017, file photo, bagged purchases from a Kroger grocery store sit in a shopping cart in Flowood, Miss. Kroger Co. will close two supermarkets in Southern California in response to a local ordinance requiring extra pay for certain grocery employees working during the coronavirus pandemic. The decision announced by the company Monday, Feb. 1, 2021, follows a unanimous vote last month by the Long Beach City Council mandating a 120-day increase of $4 an hour for employees of supermarkets with at least 300 employees nationwide and more than 15 in Long Beach. (AP Photo/Rogelio V. Solis, File)
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FILE- In this June 15, 2017, file photo, bagged purchases from a Kroger grocery store sit in a shopping cart in Flowood, Miss. Kroger Co. will close two supermarkets in Southern California in response to a local ordinance requiring extra pay for certain grocery employees working during the coronavirus pandemic. The decision announced by the company Monday, Feb. 1, 2021, follows a unanimous vote last month by the Long Beach City Council mandating a 120-day increase of $4 an hour for employees of supermarkets with at least 300 employees nationwide and more than 15 in Long Beach. (AP Photo/Rogelio V. Solis, File)

Credit: Rogelio V. Solis

Credit: Rogelio V. Solis

Kroger shares have climbed roughly 5% since the beginning of the year, while the S&P’s 500 index has risen roughly 2%. The stock has climbed 13% in the last 12 months.

Kroger continued to grow market share during the quarter, McMullen said in a statement.

“Our ability to meet our customers’ evolving needs is a testament to our deep competitive moats, disciplined investments in our increasingly robust digital capabilities, as well as our associates’ relentless focus on our customers,” he said. “We finished fiscal year 2020 with strong sales and earnings, as heightened demand for fresh, convenient food and meal solutions across modalities, including in store, pick up and home delivery, continued throughout the fourth quarter.”

The Associated Press contributed to this report

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