Kroger's 3Q a glimpse at customer loyalty push

Associated Press

NEW YORK (AP) — Kroger Co. reports its third-quarter results Thursday, which should give a snapshot of how the nation's biggest traditional supermarket chain is adapting to growing competition from drugstores, dollar stores and big-box retailers.

WHAT TO WATCH FOR: To hang onto its customers, Kroger has tried to improve the shopping experience, such as cutting down wait times on checkout lines and offering a loyalty program with discounts based on past purchases. In the previous quarter, the Cincinnati-based company said the efforts seemed to be paying off, with sales at supermarkets open at least a year up 3.6 percent, when excluding fuel. The metric is a key gauge of health because it excludes the impact of newly opened and closed locations.

In addition to its namesake stores, Kroger operates Food 4 Less, Fred Meyer, Dillon's and other chains.

WHY IT MATTERS: Kroger and other grocery store operators have been struggling to hold onto shoppers at a time when people are increasingly getting groceries from specialty markets such as Whole Foods and big-box retailers such as Target Corp., as well as drugstores and dollar stores. According to UBS Investment Research, traditional supermarkets now account for 51 percent of grocery sales, down from 66 percent in 2000.

As big-box retailers have expanded their grocery sections, Kroger is investing more in its Marketplace stores, which have a bigger footprint and sell car parts and furniture in addition to groceries. Earlier this year, Kroger said it would start selling clothes for the first time at a Kroger Marketplace store in Ohio. The store sells shoes, jewelry and undergarments, including brands such as Skechers and Levi's. The company has about 70 Marketplace stores, up from 42 five years ago.

In October, the company raised its forecast for the year, citing expansion into new and existing markets. Over the long term, Kroger Co. now expects earnings per share to grow 8 percent to 11 percent, up from the previous forecast of 6 percent to 8 percent.

LAST YEAR'S QUARTER: The company earned $195.9 million, or 33 cents per share. Revenue was $20.59 billion.

WHAT'S EXPECTED: Analysts on average expect a profit of 43 cents per share on revenue of $21.51 billion, according to FactSet.

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