Last week Kroger reported results for its fourth quarter and 2015 fiscal year, which ended on January 30, 2016. Some key performance highlights:
- 9% identical supermarket sales growth (excluding fuel) in Q4, continuing its string of quarterly identical supermarket sales growth, now at 49 straight quarters. That’s an incredible 10+ years running. 2015 full-year identical supermarket sales growth: +5.0% (without fuel).
- 2015 total sales, including fuel and Roundy’s (acquired in December 2015), increased 1.3% to $109.8 billion compared to $108.5 billion in 2014. Excluding Roundy’s and fuel, total sales were up 5.5% in 2015.
- Reduced operating expenses as a percentage of sales for the 11th straight year. Kroger recorded operating profit of 3.3% in 2015, up from 2.9% in 2014.
- The end result is a 2015 net profit margin (NPM) of 1.9% compared with 1.6% in 2014.
Kroger Private Label Gains Ground
Private labels accounted for more than $20 billion of Kroger’s revenue in 2015. The retailer reports that its store brands represented 26.2% of sales dollars and 29% of total units in Q4. The Simple Truth brand continues to be a key sales driver. As reported by Kroger: “Simple Truth continues to grow at an incredible rate, setting sales records quarter after quarter. The brand reached $1.5 billion in revenue for the year.”
The retailer is increasing marketing and merchandising efforts around Simple Truth in a big way.
- The store brand has its own website: SimpleTruth.com. Here shoppers can learn about the organic, natural and “free from” products offered by Kroger. The site includes a complete product list; ability for shoppers to create their own shopping list; get coupons and recipes; and provide product reviews.
- Dedicated in-store displays featuring Simple Truth products are becoming a key highlight in Kroger stores.
- Increasingly, digital coupons and other special promotions for Simple Truth products are popping up on Kroger’s mobile app.
Key Takeaways
- Kroger will continue to be a growth story. The retailer projects 2016 comp-store growth (excluding fuel) in the 2.5% to 3.5% range.
- Expect more new and remodeled Kroger stores in the coming year. Capital investments (excluding mergers, acquisitions and purchases of leased facilities) in the coming year are expected to be in the $4.1 to $4.4 billion range, representing more than a 25% increase compared with the $3.3 billion in capital investments in 2015.
- Watch for more innovation and expansion of Kroger’s private brand portfolio. For example, it recently extended Simple Truth into household, personal care and baby products.
- We’re likely to see Simple Truth add more gluten-free products to its line-up as well. For more see previous post: Kroger Simple Truth Expands Gluten Free Range.