Looks like Kroger Co.'s (KR) investment in food is working out.
The grocery chain beat Wall Street expectations Thursday, Nov. 30, in its third-quarter results, reporting earnings of 44 cents per share. That's compared with the analysts' forecast of 40 cents. Net earnings totaled $397 million while sales reached $27.7 billion, an increase of 4.5% year over year and again exceeding the Street's estimate of $24.5 billion in total sales.
Identical supermarket sales, or same-store sales, grew by 1% in the third quarter — slightly above projections of a 0.9% uptick.
"This quarter shows that by investing for the future, our business continues to improve and gain momentum," CEO Rodney McMullen said in a statement.
Kroger's strategic plan to refine its food products, dubbed Restock Kroger and unveiled in October, is "off to a great start," he added. "We continue to accelerate our digital and ecommerce offerings, to grow Our Brands, to lower prices for customers, and to invest in our associates."
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The Cincinnati-based grocer also reported a gross margin of 22.4% of sales. The $27.7 billion in total sales reflects a 4.5% increase compared to the same period last year. In the third quarter, Kroger announced two new private label brands in food products and a floral line, Bloom Haus. Earlier this month, it raised eyebrows with its plans to launch an apparel line next year. Kroger also boasted in its earnings release that it's investing $500 million in employee training over the next three years and hiring some 14,0000 part-time workers for the holiday season.
McMullen suggested that the company is confident about the fourth quarter after posting a stellar Black Friday.
"The holidays are always Kroger's time to shine. In fact, we had our best ever Black Friday results for general merchandise, led by record sales at [regional store brand] Fred Meyer" he said in the statement.
Kroger shares are up 10% pre-trading Thursday following the release. After losing nearly 30% of its value this year, the Kroger stock has been on the rebound since its successful Investor Day in October, during which the company detailed a turnaround effort. To focus on food, Kroger will expand self-checkout, continue to personalize coupons and develop tools for customer traffic in stores.
The chain is also in the process of selling its 800-some convenience stores across the country, operating under the brand names Turkey Hill, Loaf 'N Jug, KwikShop, Tom Thumb and QuickStop.
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