Digital sales increased 58% in the quarter

CINCINNATI — Kroger Co. on Thursday reported fiscal fourth quarter net income of $259 million, down from $854 million a year earlier, as investments weighed on profits.

Net sales for the quarter ended February 2 declined 9.5% to $28 billion. When adjusted for factors including an extra week in 2017, divestiture of its convenience stores and the acquisition of meal kit provider Home Chef, fourth quarter sales increased 1.6%, Kroger said.

“Kroger solidly delivered on what we set out to do in 2018, which was an investment year that laid the groundwork for us to achieve our 2020 Restock Kroger targets, including financials,” Rodney McMullen, Kroger’s chairman and chief executive officer, said in a statement. “We reached our FIFO operating profit goal and finished the year with sales and business momentum. We have a clear path to achieve $400 million in incremental FIFO operating profit growth and $6.5 billion in cumulative Restock cash flow by the end of 2020.”

Sales at stores open for at least five quarters, excluding fuel, increased 1.9%. Kroger’s digital sales rose 58%. The retailer now offers delivery or online pickup at 91% of its stores.

Among Kroger’s e-commerce investments last year was its stake in U.K.-based Ocado Group, which is developing Kroger’s U.S. network of automated warehouses to serve as customer fulfillment centers. Kroger and Ocado have identified the locations of the first three of 20 centers they intend to build and operate over the next three years.

This year, Kroger expects overall capital spending of between $3 billion and $3.2 billion, compared to $3 billion last year.

Kroger forecast net earnings, after adjustments, of $2.15 to $2.25 a share in its current fiscal year, compared with $2.11 a share during the last fiscal year.

Fiscal 2018 was the first full year that management has been executing the company’s three-year transformation plan, called “Restock Kroger.”

“As America’s grocer, Kroger has the winning combination of local presence plus a digital ecosystem enhanced by strategic partnerships enabling us to offer our customers anything, anytime, anywhere,” McMullen said. “We are transforming from grocer to growth company by deploying our assets to serve even more customers and create margin-rich alternative profit streams. We are well positioned to deliver on our Restock Kroger vision to serve America through food inspiration and uplift.”