US Insights

3 Reasons Kroger Will Win in 2018

Diana Sheehan

Director

Retail 03.09.2018 / 10:00

Kroger

Kroger’s performance reinforced that they are stable and growing.

Kroger is a retailer that continues to buck the trend of catering to Wall Street when making strategic decisions. Leadership has historically been vocal about the fact that they make decisions based on driving long-term success, not short-term gains. Their stock price often gets hurt because of it.

Yesterday, Kroger announced a strong finish to the year – with 1.5% identical supermarket sales growth, without fuel, in Q4 2017, and net ID sales growth of 0.7% for fiscal 2017. While definitely not their strongest year, Kroger’s performance reinforced that they are stable and growing as they move into fiscal 2018, expecting similar growth this year.

For investors, Kroger’s 2018 guidance leads to some concern, as the retailer insists on investing in its long-term Restock Kroger strategy rather than focusing on short-term wins that could be gained from macro factors like tax reform wins. Yet we at Kantar Consulting believe Kroger’s approach of investing today for tomorrow, regardless of the short-term implications, keeps them well positioned to grow in 2018 and beyond.

Why is Kroger positioned to succeed long-term?

  • The three “P’s” of investment: While other retailers are using the financial windfall of tax reform to invest in their employees in their near-term with one-time bonuses and get big headlines, Kroger’s strategy of focusing on its People long-term, Pricing short-term, and net Profitability for investors takes a broader view, with extended upside. This feeds into their larger Restock Kroger initiative and keeps the organization moving along the path they laid out in 2017. More importantly, it builds a consistency in strategy that creates opportunities for suppliers, while maintaining stability for employees.
  • Restock Kroger: The clear strategy Kroger laid out in 2017 that focuses on customer experience, customer value, people, and purpose provides one of the clearest and most-defined measures of success in the industry. However, it is also broad enough that Kroger can be flexible as shoppers’ needs and approaches to shopping evolve. Even as the competitive landscape changes, the tenets of the Restock Kroger strategy are founded in what today’s shopper cares about, which means that unless their demands change drastically, Kroger can evolve naturally and organically, with minimal disruption.
  • Scale and diversification: In a highly fragmented shopper landscape, Kroger currently has a highly scalable but hugely diverse portfolio of banners and formats in which it competes. Even some of the top retailers in the country – from Aldi to Amazon to Walmart – are searching for ways to reach a fragmented shopper base. Amazon is closest to offering everything for everyone, but hasn’t mastered the experiential piece that allows retailers to build true loyalty with shoppers beyond price/assortment. Kroger may be able to use its scale and reach to change how shoppers connect with retailers, using its 84.51⁰ loyalty card data insights to better understand each unique shopper.

Learn more about Kroger’s strategies for success in 2018 and beyond by joining the Kantar Consulting team in Cincinnati on March 21 and 22. Learn more about the Kroger Workshop and register here

Source: Kantar Consulting

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