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The grocery chain company said it accelerated its digital presence by increasing delivery sales 17% year over year.

The Kroger Co. increased its digital engagement in its fiscal first quarter ended May 25, 2024 — though total sales growth was nearly flat.

CEO Rodney McMullen said in an earnings call with investors that Kroger expects customer sentiment “to continue improving” as inflation moderates. But for now, many are “managing economic uncertainty.”



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“As we’ve seen over recent quarters, customers continue to seek value and are shopping with us differently based on their financial situations,” McMullen said. “Spending from premium and mainstream customers continue to be strong.”

He added that Kroger is starting to see positive signs among its “most budget-conscious households.”

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Kroger has moved up to No. 6 in the Top 1000, Digital Commerce 360’s database ranking the largest online retailers in North America. Kroger is first in the Top 1000’s Food/Beverage category. However, it competes with Mass Merchants that rank higher than it in the Top 1000 — Walmart and Target — for online grocery sales.

Kroger digital sales

In Q1, Kroger said, it accelerated its digital presence by increasing delivery sales 17% year over year. It also increased digitally engaged households 9% year over year.

Kroger digital sales increased more than 8% in Q1, said Todd Foley, interim chief financial officer, in the earnings call. For total Kroger sales, which increased to $45.3 billion in Q1, gross margin was 22.4% of sales. Whereas total sales increased slightly from $45.2 billion in the previous year’s Q1, gross margin decreased slightly (down seven basis points), he said.

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McMullen said delivery and pickup both grew in the quarter. Kroger’s delivery team has improved fill rates, he said. That refers to the number of orders Kroger can ship from its available stock. It also reduced wait times and improved on how many of its orders were delivered without error, he added.

“Through the power of machine learning and AI, we are developing new ways to elevate the pickup experience for customers and at the same time reduce costs,” McMullen said. “With dynamic batching of orders, these tools are providing associates the most effective pick routes, which is enabling us to dramatically reduce pick lead time in our highest volume stores.”

Additionally, he said customers love Kroger’s delivery experience for refrigerated products. The Kroger delivery network has nearly doubled sales year over year in Q1, he said.

Personalization and retail media at Kroger

Personalization has helped Kroger engage with more digital customers, McMullen said. As a result, Kroger customers clipped 18% more digital coupons than they did in the year-ago quarter.

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“Capturing more digital households is a key to our long-term growth model as these households are more loyal, spend nearly three times as much with us and drive our alternative profit businesses,” McMullen said.

Meanwhile, McMullen said Kroger Precision Marketing, the company’s retail media network, is on pace to meet full-year expectations of more than 20% growth. Kroger Precision Marketing added new capabilities with Meta on June 19, he said. It continues to “broaden its reach by offering its custom audiences and ad measurement capabilities to advertisers on the Meta social media platforms.”

McMullen said this will create more opportunities for clients to reach relevant audiences in more places.

Possible Kroger merger with Albertsons

McMullen told investors that Kroger believes its updated divestiture plan meets regulators’ concerns and will put the company in a better position to complete its merger with Albertsons.

Kroger and Albertsons announced in April a plan to sell grocery stores to C&S Wholesale Grocers. This came in response to a statement the Federal Trade Commission had released in late February calling the proposed Kroger-Albertsons merger “anticompetitive” and suing to block the $24.6 billion acquisition.

McMullen said the proposed divestiture “positions C&S to be a strong and successful competitor.”

Albertsons ranks No. 24 in the Top 1000. C&S currently does not rank in the Top 1000.

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