Ambiguous outlook influenced Kroger’s sentiments in Q1 2020, says GlobalData

An uncertain 2020 outlook has impacted The Kroger Company’s (Kroger) sentiments, says GlobalData, a leading data and analytics company.

Kroger’s sentiments declined by over 11% in the first quarter (Q1) of 2020 (ended 23 May*) compared with 2019 (ended February), as tracked by GlobalData’s Filing Analytics database. Its sentiments were affected by the management’s underwhelming statements on e-commerce profitability and its future outlook. Despite the sentimental decline, Kroger’s e-commerce sales and investments are a bright spot for future growth.

Rinaldo Pereira, Senior Analyst at GlobalData, comments: “The uncertainty around Kroger’s future outlook influenced investor sentiments following the earnings call. Investor sentiments were also affected by management’s comments on moderate customer stockpiling growth in the coming quarters due to the restart of the US economy.”

On the earnings call, the company commented on its careful cash use due to an uncertain pandemic environment. However, Kroger has reiterated that it expects to meet its near-term guidance.

Pereira continues: “Kroger has cited the dynamic US consumer behavior as the reason for its inability to forecast future growth. The company has also claimed that its e-commerce business is currently not as profitable as physical shopping, despite posting healthy digital sales growth in Q1 2020.”

Pereira continues: “Kroger’s e-commerce segment lags behind competitors such as Walmart, Target, and Costco. The company relies on external parties such as Instacart for online groceries, which impacts its customer loyalty and retention.”

However, Kroger’s e-commerce-related active job showcased a consistent trend during Jan-Jun 2020, as tracked by GlobalData’s Job Analytics database. The company is focusing on its partnership with robotics firm Ocado to expand its e-commerce network and reduce delivery times.  With the pharmacy business affecting its margins, Kroger expects its digital investments to fuel margin growth in the future by continuing its e-commerce hiring spree.

Pereira concludes: “Kroger and Ocado are expanding online delivery facilities across the US and are expected to open up in 2021. It will be interesting to see if the company further increases e-commerce hiring in the coming months to step up the launch of its online grocery facilities before the start of 2021.”

 *  Earnings transcript released on June 18, 2020

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