US retail heavyweight Kroger Co. has reported an increase in total sales of 5% to $115.3 billion for the 2016 fiscal year, but experienced a dip in the fourth quarter.
Mergers with companies such as Roundy's and ModernHEALTH (which cost $390 million) contributed to annual growth, the company said.
However, the chain experienced a drop in like-for-like earnings, excluding fuel, of -0.7% for the fourth quarter.
The identical supermarket sales growth for the same period was only 1%, again without fuel.
The meagre gains could be attributed to deflation in food costs, which have affected other retailers, and price competition from rivals such as Walmart.
The company's stock fell as much as 8.2% after the grocer predicted slower growth last March, hurt by pressure on prices and its merger with the Roundy’s chain.
Customer 1st Strategy
Chairman and CEO Rodney McMullen commented on the results, "True to our history, we will continue making proactive investments in our Customer 1st Strategy to maintain our strong competitive position.
"We are lowering costs to invest those savings in our people, our business, and technology. This approach will enable us to deliver on our long-term net earnings per diluted share growth rate target of 8 – 11%, plus an increasing dividend, as it has in the past."
The company said that 2016 saw the 12th consecutive year of market share gains, and such advancements as the creation of an additional 420 ClickList locations for its 640 online ordering locations.
Kroger also reported that it had created 12,000 supermarket jobs in 2016.
In 2017, the company expects like-for-like sales growth, excluding fuel, to stay flat or grow 1%.
It also forecast capital expenditure of $3.2 to 3.5 billion, not including mergers, acquisitions, or purchases of leased premises. This is a slight drop from 2016, which saw $3.6 billion spent in capital expenditures.
© 2017 European Supermarket Magazine – your source for the latest retail news. Article by Karen Henderson. Click subscribe to sign up to ESM: The European Supermarket Magazine.