Is Kroger following the Sears playbook for self-destruction?
Last week, Kroger reported its third quarter earnings, and one industry expert has questioned whether the grocery giant is on the right path or if it is making the same types of mistakes that caused Sears to crash and burn under former CEO Eddie Lampert.
Specifically, Neil Saunders, managing director of GlobalData and a member of the RetailWire BrainTrust, expressed concern that Kroger may be focusing too much attention on growing digital sales at the expense of its physical locations, MarketWatch reports. He pointed to Kroger stores that “feel run down and dispiriting” as a cause for concern.
“This [digital] mantra was also one peddled by Eddie Lampert, who used it to justify the deterioration in stores,” according to Mr. Saunders. “This did not work well for Sears and ultimately, we do not believe it will work out well for Kroger unless the company comes up with a more balanced growth strategy.”
Kroger CEO Rodney McMullen reported that digital sales for the company increased 60 percent in the third quarter with click-and-collect services experiencing the biggest gains as more stores offer the service.
Speaking on last week’s earnings call, Mr. McMullen did say that Kroger is taking a holistic approach to its business.
“Redefining the customer experience means offering customers incredible physical and digital experiences, a fantastic offering and friendly and caring associates,” he said (via Seeking Alpha). “Delivering an exceptional customer experience through the Kroger ecosystem creates incremental new profit streams which, in turn, drives the economic model that makes the seamless experience possible.”
Kroger’s same-store sales, excluding fuel, grew 1.6 percent in the third quarter. The company’s adjusted earnings per share grew nine percent to 48 cents, slightly higher than Wall Street’s expectations.
- Kroger Reports Third Quarter 2018 Results – The Kroger Co.
- Kroger Co. (KR) CEO Rodney McMullen on Q3 2018 Results (Earnings Call Transcript) – Seeking Alpha
- Analyst worries that Kroger comment will lead the grocer down the same path as Sears – MarketWatch
DISCUSSION QUESTIONS: Do you share the concern that Kroger needs to invest more in its stores? What are the keys in the grocery channel to finding the right balance between digital and physical operations while integrating the two effectively?