The Kroger Co. maintained its first-quarter guidance and reported a 30% increase in March same-store sales, with surging demand in the middle of the month amid the COVID-19 outbreak.
Kroger said it started to see a significant shift in customer behavior during the last few days of February as shoppers started stocking up on sanitizer, cleaning products, water, paper products, boxed meal solutions and health-related products. Sales sharply accelerated in March with identical retail supermarket sales without fuel trending approximately 30%.
“This was driven by dramatically heightened demand in the middle of the month as customers were stockpiling, which then tapered, but remained higher than normal in the final week, as customer behavior transitioned to the next phase, where they are adjusting to new restrictions on work and travel,” the company stated. “The demand has been broad based across grocery and fresh departments. It is still too soon to understand what the impact will be in future periods.”
Kroger said that certain first quarter costs will be higher than prior expectations amid increased investments in frontline employee wages, expanded paid sick leave, record hiring and enhanced safety protocols throughout its operations. The company is also investing in its supply chain to expand capacity where possible.
“We are seeing strong sales and are at the same time investing in our business to support our customers and associates through the current uncertainty,” said Gary Millerchip, Kroger’s CFO.
As a result of recent trends, Kroger expects first quarter identical sales excluding fuel and adjusted EPS to be significantly better than the annual growth rate provided in guidance for full year 2020.
Looking towards the rest of the year, Kroger expects volatility in sales throughout the year as the impact of COVID-19 on the consumer evolve. It anticipates the following to have an impact on full-year results:
• Continued investments to help customers and associates through the COVID-19 pandemic;
• Delay of certain cost-saving initiatives to focus all resources where they are needed most in the short term - to address the impact of COVID-19;
• Uncertainty surrounding the longer-term impact of COVID-19, including the length of travel and other restrictions, on food and grocery sales, fuel and alternative profit streams; and
• Potential long-term shift in customer behavior toward eating more food at home.
In light of all these factors, Kroger leadership believes maintaining current guidance is prudent “at this time” and is therefore reconfirming guidance for full year 2020.
Kroger is delaying certain previously scheduled cost-saving initiatives so that teams across the enterprise can be completely focused on deploying resources where they are needed most to enhance safety, maintain an efficient supply chain and help customers and communities.
“Over the past several quarters, we have talked about our successful cost savings initiatives to create future value and we have plans in place to resume them quickly, when the timing is right,” said Millerchip.
Kroger also detailed the measures it is taking to protect the health and safety of its associates and customers, including”
• Enhancing daily sanitation practices, including cleaning commonly used areas more often like cashier stations, self-checkouts, credit card terminals, food service counters and shelves;
• Permitting and working hard to procure protective masks and gloves for associates;
• Installing plexiglass partitions at check lanes, pharmacy and Starbucks registers across the enterprise;
• Adding floor decals to promote physical distancing at check lanes and other counters;
• Adjusting store operating hours to allow more time for our associates to rest, clean and replenish inventory; and
• Continuing to expand online pickup and delivery, and contactless payment solutions like Kroger Pay.
The Kroger family of companies is supporting associates in a variety of ways, including:
• Providing a Hero Bonus – a $2 premium above standard base rate of pay, applied to hours worked March 29 through April 18 – for all hourly frontline grocery, supply chain, manufacturing, pharmacy and call center associates. This follows and is in addition to the company’s previous commitment shared on March 21, which provided a one-time bonus to frontline associates, which pays out on April 3.
• Beginning next week, Kroger is adding ExpressPay – a new benefit that allows most hourly associates to access some of their pay faster, putting money in their pockets sooner than usual.
• Helping associates who are affected by COVID-19 – whether experiencing symptoms and self-isolating, diagnosed or placed in quarantine – being supported with paid time off.
• Making additional resources available for those facing hardship, including lack of access to childcare and for those considered high-risk, due to COVID-19 through the Kroger Family of Companies Helping Hands fund.
• Establishing an Associate Hotline to answer benefit questions quickly.
• Providing access to mental health services and other benefits to support associates’ mental and physical well-being during this stressful time.
• The Kroger family of companies has hired more than 32,700 new associates in the last two weeks, including workers from the hardest-hit sectors like restaurants, hotels and food service distributors.
Kroger and its affiliates are supporting communities in a variety of ways, including:
• The Kroger Co. Zero Hunger | Zero Waste Foundation is rapidly deploying more than $3 million in hunger-relief resources to communities disproportionately impacted by the coronavirus pandemic through its nonprofit partners, Feeding America and No Kid Hungry. The funding will not only support local food banks nationwide, but also fund initiatives that ensure children, whose schools may be closed, still have access to nutritious meals.
• Making it easy for customers to support The Kroger Co. Zero Hunger | Zero Waste Foundation’s mission to create communities free of hunger and waste by choosing to roundup their purchases to the nearest dollar at every self-checkout lane in America or donate at ZeroHungerZeroWasteFoundation.org.
• Donating food and funds to local food banks and hunger-relief efforts.
• The Kroger Co. Foundation supported the American Red Cross Annual Disaster Giving Program and Disaster Responder Program at the $500,000 level for 2020, enabling the Red Cross to develop capacity, leaders and resources to provide relief.