"Best ever Black Friday results for general merchandise"

CINCINNATI — Kroger reported third quarter sales and earnings that topped analysts expectations, and the company said it was upbeat about its prospects for the holiday season.

The supermarket retailer reported a 1.1% increase in same-store sales, excluding fuel, in the quarter. That topped an average analyst forecast of a 0.9% gain, according to Consensus Metrix. Net earnings were $397 million, or $0.44 per diluted share. Kroger’s net earnings for the third quarter last year were $391 million, or $0.41 per diluted share.

The results bode well for the company’s Restock Kroger program, which was launched in October, said Kroger chairman and chief executive officer Rodney McMullen.

“Restock Kroger is off to a great start,” McMullen said in a statement. “Customers are recognizing our efforts to redefine the customer experience and rewarding us with their loyalty. We continue to accelerate our digital and ecommerce offerings, to grow Our Brands, to lower prices for customers, and to invest in our associates.

“The holidays are always Kroger’s time to shine. In fact, we had our best ever Black Friday results for general merchandise, led by record sales at Fred Meyer. Everything we are doing revolves around our associates providing friendly service and fresh products to our customers.

“This quarter shows that by investing for the future, our business continues to improve and gain momentum. We remain confident in our ability to continue to grow identical supermarket store sales and market share for the balance of the year and in 2018.”

Total sales increased 4.5% to $27.7 billion in the third quarter compared to $26.6 billion for the same period last year. Total sales, excluding fuel, increased 3.0% in the third quarter compared to the same period last year.

Gross margin was 22.4% of sales for the third quarter. Excluding fuel, ModernHEALTH and the LIFO charge, gross margin increased 30 basis points from the same period last year. Lower cost of goods and sales mix more than offset continued price investments. Kroger recorded a $3 million LIFO charge in the third quarter of 2017, compared to an $8 million LIFO credit in the same period last year. FIFO operating margin dollars for the third quarter of 2017 increased $38 million, or 5.5%.

Operating, general and administrative costs as a rate of sales — excluding fuel, ModernHEALTH, and a $111 million contribution to the UFCW Consolidated Pension Plan — increased 18 basis points, the company said, adding that rent and depreciation with the same exclusions remained consistent.

The company said it made progress on a number of Restock Kroger initiatives during the third quarter. On its efforts to “redefine the grocery customer experience,” for example, Kroger said it:

• Launched the We Are Local campaign, including creating a new digital hub designed to encourage local and emerging brands to partner with the company.
• Hosted its first natural foods innovation summit to expand its natural foods offering.
• Launched and opened a new restaurant concept, called Kitchen 1883.
• Announced two new own brands product lines: a apparel brand that is set to debut in 2018, and a floral line called BLOOM HAUS that is now available in stores.

Other initiatives undertaken during the quarter included using cost savings to reduce prices, launching home delivery, powered by Instacart, in select locations in Southern California, and announcing that it will invest an incremental $500 million on its associates over the next three years.