Kroger tops profit estimates in Q2 results
Kroger’s second-quarter profit topped estimates, but its sales came in below estimates amid ongoing intense competition in the grocery sector.
Net income rose 43.9% to $508 million, or $0.62 per share, from $353 million, or $0.39 per share, in the same period a year ago. Excluding non-recurring items, adjusted earnings per share came in at 41 cents, above estimates of 38 cents.
Sales increased to $27.87 billion from $27.60 billion, below estimates of $27.93 billion. Same-store sales rose 1.6%, below expectations.
On its quarterly earnings call, Kroger management said that its ongoing efforts to adjust store layouts and rearrange brands on the shelves, with an emphasis on its own labels, impacted same-store sales.
“This effect is not a surprise to us,” said CEO Rod McMullen on the call. “We expect the headwinds from space optimization during the first half of 2018 to become a tailwind late in the third quarter.”
Looking ahead, the company raised its net EPS guidance range to $3.88 to $4.03 from $3.64 to $3.79, but affirmed its adjusted EPS outlook of $2.00 to $2.15.
Kroger has been investing in a slew of initiatives to grow its online business as it faces fierce competition in the space from Amazon and Walmart.
“We are only two quarters into our three-year Restock Kroger plan, and we are making solid progress,” McMullen stated in a release. “Kroger customers have more ways than ever to engage with us seamlessly through our recently-launched Kroger Ship, expanded the availability of Instacart, successful ClickList offering, and selling Simple Truth in China through Alibaba’s Tmall.”
Albertsons names Jim Donald president, CEO
Albertsons has named Jim Donald, its current president and COO, to the roles of president and CEO, effective immediately. Alongside Donald’s new position, the company announced that its Robert Miller, its chairman and CEO, would continue as chairman of the board.
Miller’s 57-year retail career that started when he was in high school at his neighborhood supermarket. He eventually worked his way up to the role of executive vice president of operations for Albertsons. He left the company in 1991, serving as CEO of Fred Meyer, COO and vice chairman of Kroger and CEO of Rite Aid, all before returning to Albertsons in 2006 as CEO.
“Jim is an exceptional retailer. In the seven months since he joined Albertsons Companies, he’s flown tens of thousands of miles and met personally with thousands of employees in hundreds of our stores, distribution centers, manufacturing plants, and offices around the country,” Miller said. “His expertise in listening to front-line employees and customers, facilitating employee engagement and generating sales is unmatched, and there is no better leader for Albertsons Companies at this state in our evolution.”
Donald began his career at Publix. He joined Albertsons in 1976, eventually being named vice president of operations in Arizona. Sam Walton recruited him to develop Walmart’s grocery business and Superstore concept in 1991. He joined Safeway in 1994 to become senior vice president of its 130-store Eastern region. From 1996 to 2002, he was CEO of Pathmark, after which he became CEO of Starbucks. Before joining Albertsons in March 2018 as president and COO, Donald was CEO at Haggen, then Extended Stay America, where he led its $565 million initial public offering.
“Albertsons Companies is uniquely positioned to operate in both a ‘four walls’ traditional environment and the ‘no walls’ world of technology,” Donald said. “We serve 34 million customers each week across our 2,300-plus stores and serve 5.5 million patients in our 1,700-plus pharmacies. That’s a significant food, health, and wellness footprint. We’re well positioned to serve the evolving needs of today’s customer, wherever and whenever they choose to shop with us. I am looking forward to leading this dynamic company as we focus on innovation and customer-centric retailing in all its forms.”
Stater Bros. is closing all of its pharmacies
In what some say may be another warning sign to retailers who do not have enough pull in the pharmacy business, Stater Bros. Markets announced that it is closing all 22 of its SuperRx pharmacy locations and expects to transfer the pharmacy records and inventory to nearby CVS Pharmacy locations later this month.
In a press release today, the company said that by Sept. 28, all SuperRx pharmacy locations are expected to be closed. The company noted that Stater Bros. and CVS Pharmacy are working together to ensure that the transition will be seamless for patients and that their access to pharmacy care is not interrupted. CVS Pharmacy plans to interview many of the SuperRx employees currently working at these locations.
Industry officials have long said that the changing economics of the pharmacy business, with higher costs and more government interaction and legislation, is making it harder for small pharmacy operations to compete. In many cases, including at Stater Bros., the vacated space if often given to high-margin food categories, including produce, specialty meals and other fresh sections.
The press release said that Stater Bros. is going to be taking the space used by the vacated pharmacy operations and giving it to food-related sections of the store to “better serve the needs” of its shoppers. Overall in-store operations will remain intact during the space conversion process.
“I’d like to emphasize that Stater Bros. is a strong and competitive company within the Southern California supermarket landscape poised for continued growth. This business decision will allow the Company to grow areas of our core food business that meet the evolving food needs and shifting grocery preferences of our customers. We remain committed to providing our valued customers with the very best grocery shopping experience,” stated Stater Bros. CEO Pete Van Helden.
“I’d also like to thank our loyal customers for all of their support of Stater Bros. SuperRx Pharmacies. CVS Pharmacy provides a wide range of pharmaceutical services and programs to help millions of people across America lead healthier lives, and we’re confident CVS will provide SuperRx customers with the resources and services needed to continue their healthcare regimen,” Van Helden continued.
“CVS Pharmacy is committed to providing high-quality and personalized care to patients and we look forward to bringing our innovative pharmacy care programs and services to SuperRx customers,” said Hank Casillas, Division Vice President, CVS Pharmacy. “We’re confident that SuperRx patients will be excited about our unique clinical pharmacy services, medication adherence programs, automatic refills, and the many innovative digital tools we offer to help patients manage their prescriptions.”
“Most importantly, I’m proud of the fantastic job our SuperRx Pharmacy Team has done in taking excellent care of our customer’s healthcare and pharmaceutical needs. We have great people and protecting their livelihood was a priority,” Van Helden continued. “Stater Bros. will offer all SuperRx pharmacists and pharmacy technicians continued pay and benefits for a period of time,” Van Helden concluded.
The SuperRx pharmacy locations listed below will close and all prescription files will be transferred to a nearby CVS Pharmacy location. Stater Bros. SuperRx customers will be notified of their prescription transfer dates via mail.