Kroger Does It Again Through a Blissful Quarter

Himanshu is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Grocers are having a good time as consumers are flocking to stores for more and more purchases. Food prices have also decreased which has led to more enthusiasm amongst shoppers, especially with the holiday season knocking at the door.In tandem with the spirit of this festive season, Kroger (NYSE: KR) posted results that sent stock prices north. Let us see if Kroger can continue to bask in the spirit of this season.

Efforts Paid Off…

Indeed, Kroger’s efforts are the best thing about the company.The retailer’s amazing customer-centric strategies have been the key drivers of its performance each time. Driven by easing of gas prices and promotional efforts by Kroger, its revenue in the quarter surged 6% to $21.8 billion. Attractions such as a customer loyalty program and discount coupons have been stirring great demand. Moreover, the retailer has been a customer favorite because of its efforts to make shoppers’ shopping experience better, such as reducing the waiting time at the checkout lanes.

However, the company’s bottom line was even more interesting. Kroger’s earnings jumped 40% to 46 cents a share. Its cost cutting measures, backed by increased consumer traffic and higher transaction size, brought delight to Kroger investors.

Kroger is an exceptional performer when compared to its industry peers. On one hand, Kroger is enjoying happy days with better results in each quarter and on the other, Supervalu (NYSE: SVU) is finding it difficult to survive. Its revenue has been decreasing and even the bottom line has been bleeding. In fact, disheartening second-quarter results have led the company to look for potential buyers.

However, Kroger faces stiff competition from discount retailers such as Dollar Tree (NASDAQ: DLTR), which offer great discounts and hence lures a lot of customers. It recently posted its third quarter results which overwhelmed investors. Its revenue jumped 8% as shoppers kept crowding its stores. Offering items at $1 has been the most attractive factor about the company. This essentially works during the times of crisis when people have very little money to spend. This trend led the company to expand its international operations further.

Opportunities Galore…

Coming back to Kroger, it has a number of good news to look forward to. Firstly, it revised its outlook upward which makes investors even more hopeful about the company. Even holiday season will play a very important role in driving next quarter’s performance.

The Cincinnati-based grocer has also been expanding largely and plans to continue expanding in the coming months. Its expansion plans include geographical expansion as well as store expansion. It plans to setup 52 new stores as it looks forward to greater customer demand.

It has also introduced new brands such as Simple Truth, which are free from any preservatives and other artificial ingredients. This segment is increasingly lucrative as customers are becoming highly health conscious.

Additionally, Kroger plans to strengthen its drug operations further. Hence, it has recently bought Axium Pharmacy Holdings, a specialty pharmacy, in order to offer specialty pharmacy services to its customers. Through this buyout, the retailer plans to provide complex drug therapies to people and also enhance its medicine segment.

The Bottom Line

With so many positives waiting to show effects, Kroger looks quite interesting for the months to come. It is one of the very few traditional grocers who have been quite dynamic and managed to survive in the tough economic environment. Its efforts to grow are endless and they have a bright outlook. I believe this grocer has the true potential to brighten your portfolio.


justhimanshu has no positions in the stocks mentioned above. The Motley Fool owns shares of Supervalu. Motley Fool newsletter services recommend Supervalu. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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