Digital sales in the quarter ended May 25 increased 42% from a year earlier. Kroger’s digital sales in the preceding fiscal year increased 58%.
First-quarter sales fell 1.2% to $37.2 billion, as Kroger operated fewer stores following the sales of its convenience store business.
Kroger said gross margins were 22.2% in the first quarter, but when adjusted for fuel sales declined 0.4 percentage point from the year earlier. That drop came largely from an industrywide slump in margins in the pharmacy business, Kroger said. Its gross margin was 22% in the fourth quarter.
Kroger also said revenue from alternative profit streams is on track to contribute an incremental $100 million in profit in the full year. The company has developed alternative businesses in areas like personal finance, data analytics and in-store advertising that diversify its revenues and provide new growth opportunities.
Kroger said it is continuing to build momentum in year two of a three-year plan, called Restock Kroger, to transform Kroger from a grocer to a growth company.
“Because the retail industry is constantly transforming, we proactively launched Restock Kroger to deliver for our customers and shareholders,” Rodney McMullen, Kroger’s chairman and chief executive officer, said in a statement regarding fiscal first-quarter earnings. “It all starts with our customer obsession, which is why Kroger is assembling a platform to deliver anything, anytime, anywhere.”
McMullen said the entire company is focused on redefining the grocery customer experience, improved upon by exciting partnerships that will create value.
Under Restock Kroger, the company has been updating store layouts, highlighting its own brands and bolstering its omnichannel capabilities.
The retailer reiterated its fiscal 2019 guidance on profit, identical sales and per-share earnings. Kroger expects per-share earnings to range from $2.15 to $2.25. Same-store sales should increase in the range of 2% to 2.25%.