Total sales at The Kroger Co. dipped slightly during the fiscal third quarter that ended Nov. 9, but digital sales notched another quarter of double-digit growth as more shoppers turned to delivery and online promotions.
Kroger reported $33.63 billion in total sales for the third quarter, a roughly 1% drop from $34 billion in the same period last year. The decline was mainly due to lower gas prices and the October sale of its specialty pharmacy business, according to Kroger’s earnings report.
Kroger ranks No. 6 in Digital Commerce 360’s Top 1000 Database of North America’s largest online retailers by annual web sales. Kroger is No. 1 in the Top 1000’s Food & Beverage category, though it competes with Mass Merchants — Walmart and Target — that rank higher in the Top 1000 for online grocery sales. Digital Commerce 360 projects Kroger’s online sales will reach $17.97 billion in 2024.
Kroger web sales by year
Kroger digital sales in Q3
While overall sales fell, Kroger’s digital sales grew 11% year over year, though the grocer did not provide specific figures. Delivery sales, which rose 18% from the year prior, outperformed other channels, with customer fulfillment centers playing a key role, according to CEO Rodney McMullen.
“Increasing ecommerce penetration is important to our model, as households who shop with us digitally and are in our stores are our most loyal customers and increase retail media monetization opportunities as well,” McMullen told investors during the company’s earnings call. “As our digital business grows, particularly in our delivery network, it continues to have a larger impact on our financial results.”
Kroger sales and earnings overview
During Q3, Kroger’s identical-store sales excluding fuel climbed 2.3%, beating analyst expectations and reversing a 0.6% decline in the same quarter of 2023.
Net earnings fell to $618 million from $646 million a year ago, driven by a $145 million adjustment related to its planned merger with Albertsons.
McMullen highlighted a divide in consumer behavior during the quarter. Premium and mainstream customers are now returning to pre-pandemic shopping habits, he said, while inflation and interest rates continue to weigh on budget-oriented shoppers.
“While overall consumer sentiment remains low, expectations are improving, which positions us well for the holidays and into next year,” he said.
Kroger’s digital engagement and loyalty program
McMullen said that Kroger Plus, its free customer loyalty program, is offering savings and rewards to members that in turn drive traffic to its digital experience. Digital coupon clipping is up 5% this year compared to last year, he said, resulting in 14% greater savings for shoppers.
Kroger is also expanding Boost, its paid loyalty subscription, with new perks, including the addition of a Disney+, Hulu, or ESPN+ streaming benefit for annual members during Q3, McMullen said.
Boost, which costs $59 or $99 per year, also includes special savings, double or triple the fuel points, and free delivery.
“Boost is one of the important ways we are increasing ecommerce penetration, providing customers an affordable membership model for free delivery,” he said.
Private-label and fulfillment centers drive growth
Kroger’s private-label line, Our Brands, also had another strong quarter, outperforming national brands, according to interim chief financial officer Todd Foley. This was led by mid-single-digit growth in its premium Private Selection products, he said. During Q3, Kroger said it launched 226 new products in its Our Brands assortment.
“Customers continue to demand premium products, but at the same time are looking for value,” Foley told investors on the earnings call. “Our Private Selection brand is a perfect solution by offering our customers premium quality at an attractive price.”
Foley also stressed Kroger’s customer fulfillment centers, or CFCs, as pivotal to growth in its delivery solutions.
“The CFCs are offering customers a superior digital experience with excellent in-stocks, fresh items, and a white-glove on-time delivery,” he said. “CFC growth was driven by a significant increase in households and trips, as well as an increase in basket size.”
In addition, Kroger launched an AI-powered sell-through tool in Q3 to improve inventory management and shelf freshness, with plans to expand its forecasting capabilities, Foley said.
Updates on the Albertsons merger
During the call, McMullen touched on Kroger’s planned $24.6 billion merger with Albertsons, reiterating that the company remains “committed to closing the merger.” The Federal Trade Commission is challenging the deal, arguing it could hurt consumers.
“As we await the court rulings and the regulatory challenges to the merger, we remain confident in the facts and the strengths of our position,” McMullen said. He also touched on what would happen if the merger doesn’t go through, saying, “We’ve always made sure that we don’t need to do mergers to make our business successful.”
“We’re super excited about Albertsons and the potential, and we believe we will be able to add a ton of value for giving customers better value,” he continued. “The people there will be able to provide security and grow our business and create additional career opportunities and support communities. But if it doesn’t happen, we’ll continue to go on.”
Albertsons ranks No. 24 in the Top 1000.
Percentage changes may not align exactly with dollar figures due to rounding. Check back for more earnings reports. Here’s last quarter’s update on Kroger digital sales.
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