Kroger’s Sales Rise after Digital Investments

An employee restocks vegetables at a Kroger Co. supermarket in Louisville, Ky.. The Cincinnati-based supermarket chain reported a 2.5% increase in same-store sales. Photo: Luke Sharrett/Bloomberg News

Kroger Co. KR -6.30% reported slightly higher sales in its latest quarter after recent investments in online ordering and other efforts to draw in new customers.

The increase to $28.2 billion in sales from $28 billion a year earlier was lower than the gains analysts expected though, and profit declined to $297 million, also missing forecasts.

The Cincinnati-based supermarket chain reported a 2.5% increase in same-store sales excluding fuel, up from the corresponding period a year ago and beating an estimate of 1.9% growth. Digital sales grew 31%.

The nation’s largest supermarket chain is trying to keep its footing in the rapidly changing grocery industry. Like other food retailers, Kroger faces pressure to keep prices low as it invests in delivery to compete better against Amazon.com Inc. and Walmart Inc., the nation’s top grocery seller.

Walmart and Target Corp. posted higher sales in their most recent quarters thanks to investments that have boosted digital sales. Discounter Grocery Outlet Holding Corp., which went public in June, unveiled ambitious plans to grow the number of its stores by 10% annually. Organic grocer Sprouts Farmers Market Inc. recently lowered its guidance for the full year as growth continues to slow.

Kroger is in the middle of a three-year plan to revive its business. The company is expanding its digital capabilities, investing in technology and making more hires. It is also overhauling stores and building automated warehouses as part of its partnership with British retailer Ocado Group PLC.

The owner of Fred Meyer, Ralphs and Harris Teeter stores has said the growth plan should generate $4 billion of free cash flow and add $400 million in operating margins by 2020 through cost savings and better sales.

Kroger is also trying to add new products to attract more customers. The 136-year-old company has added clothing items and financial services to its sales strategy, as well as new grocery items like store-branded meatless burger patties.

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