Well played, Kroger.
Last month, Kroger Company (KR) - Get Report CEO Rodney McMullen presented to investors an image of poise, at a time when grocers left and right are scrambling to defend the industry against Amazon.com Inc.'s (AMZN) - Get Report arrival in June. The famous disruptor's $13.7 billion acquisition of Whole Foods, McMullen said, created too much "noise in the field," suggesting that Kroger isn't all that concerned about where it stands in the industry.
But from its third-quarter earnings Thursday, Nov. 30, it's clear that Kroger did concern itself with online grocery, posting strides in its digital revenue. In that period, online revenue increased by 109%, the company said in the earnings call.
It's click-and-collect program, ClickList, is now available at 1,000 of its 2,800 stores. That's up 500 from this time in 2016. As for home delivery, which Kroger introduced about a year ago, 300 stores now offer the feature. But the Cincinnati-based chain isn't in any rush rolling out delivery.
"Not every customer wants things delivered to their house," McMullen told analysts. "We'll continue to offer more opportunities...but when you think about this year's Black Friday being a record year, folks claiming that everything's going to get shipped to home are ahead of themselves."
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For now, the bulk of Kroger's home delivery is handled by third-party companies, such as Uber and delivery service Shipt. Earlier this month, it announced a partnership with Instacart in Southern California locations.
Kroger was in the curbside pickup game long before the Amazon deal. ClickList was created in the image of Harris Teeter's grocery pickup program after Kroger acquired the regional supermarket chain in 2013. "When we merged with Harris Teeter, their insights was what caused us to start doing ClickList," McMullen said. "The only changes we made was asking the Harris Teeter team if they had to do it over again, what would they do differently."
Its biggest competitor, however, may still be further along. Wal-Mart Stores, Inc. (WMT) - Get Report has already piloted a handful of different food delivery services. In October, it bought last-mile delivery company Parcel to help roll out delivery en masse.
Kroger posted impressive earnings Thursday, reporting same-store sales growth of 1% and beating Wall street forecasts with 44 cents in earnings per share. The company attributes its success to its low food prices.
"The biggest thing we always focus on is the customers we already have and how can we get more on their baskets," McMullen told TheStreet in October. "We spend by far the majority of our energy on people who are already engaging with us."
So far, the tactic seems to be working. Third-quarter results showed that customers who engage with Kroger both online and in-stores — what's considered a "seamless" experience — end up spending more per week than those who don't.
"Everything we're seeing in our data and in customer behavior," he said, "tells us Kroger's transition to seamless is working."
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