A focus on fresh, affordable food and an enhanced digital strategy has proven a successful combination, says The Kroger Co., which reported its first quarter 2023 results without fuel on June 15.

"Kroger achieved solid first quarter results guided by the execution of our ‘Leading with Fresh and Accelerating with Digital’ strategy,” CEO Rodney McMullen said in the release. “As more customers are feeling the effects of inflation and economic uncertainty, we are growing customer households by providing fresher products at affordable prices with personalized rewards.

“Our amazing associates are bringing this strategy to life every day by delivering a full, fresh and friendly shopping experience with zero compromise on quality, selection and convenience,” he added.

The Cincinnati-based grocer reported total company sales of $45.2 billion in the first quarter, compared to $44.6 billion for the same period last year. Excluding fuel, sales increased 3.5% compared with the same period last year.

Gross margin was 22.3% of sales for the first quarter. The FIFO (First in, First Out) gross margin rate, excluding fuel, increased 21 basis points compared to the same period last year. This increase in rate was achieved while also investing in price to maintain a competitive price position and deliver greater value for customers, the company said.

Kroger primarily attributes the improvement in the FIFO gross margin rate, excluding fuel, to the performance of its Our Brands, sourcing benefits, lower supply chain costs and the effect of its terminated agreement with Express Scripts, partially offset by higher shrink and increased promotional price investments.

"Kroger's first quarter results demonstrate the durability of our business model in a more challenged operating environment,” Kroger Chief Financial Officer Gary Millerchip said in the release. “The investments we have made over recent years to deliver for our customers and strengthen our value creation flywheel give us the confidence to reaffirm our full-year identical sales without fuel and adjusted net earnings per diluted share guidance. We delivered strong Adjusted Free Cash Flow in the quarter and as a result of improvements in working capital, we are raising our guidance to a range of $2.5 [billion] to $2.7 billion for the fiscal year 2023.”

Leading with fresh

What does “Leading with Fresh” mean to Kroger?  

The grocer says it accelerated its Fresh Produce Initiative, designed to deliver fresher food to shoppers and keep perishables on the shelf longer, with a total of 1,738 stores now certified, driving higher identical sales without fuel in certified stores, the company said.

Kroger also reports increasing “alternative farming offerings” to 1,094 stores, which it says has increased shopper access to locally sourced fresh products.

An expanded on-demand floral and sushi delivery to the Uber Eats marketplace, has further extended its fresh footprint, according to the release.

On the fresh and affordable front, Kroger has consistently promoted fresh produce and other fresh foods at competitive prices during key holidays.

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Driving digital

Kroger says its digital sales grew 15% in the first quarter of 2023. It also increased digitally engaged households by 13% over last year.

A continued focus on its delivery solutions, including Kroger Boost and its customer fulfillment centers, resulted in increased delivery sales of 30% over last year, the company said.

Sustainability

In its first quarter results ending May 20, 2023, Kroger also highlighted its sustainability initiatives including:

• Received 2023 SEAL Business Sustainability Award for Zero Hunger | Zero Waste.
• Attained milestone of more than 1 million pieces of Our Brands flexible plastic product packaging recycled.
• Launched new Kroger + USO mobile food kitchens to support military families.

“Looking forward, Kroger's go-to-market strategy positions us well in a wide range of economic environments to continue to deliver for our customers, invest in our associates and achieve sustainable and attractive returns for shareholders," McMullen said.